PICK A SIDE!!!!

Ugh. Civil war in Iraq. To me this is a no brainer.

The United States has the ability for an unspeakable amount of physical force, in other words violence. We can do ANYTHING we want as long as it involves killing and destruction. That sounds horrible honestly, but the truth, or the "good" in that is that we represent an unbeatable military threat to ANY frontal assualt in the world today. No one can beat us, head-on.

Fact- WE DON'T WANT TO LEAVE. It is in the United States interest to stay in Iraq for a number of reasons. 1 - We actually believe establishment of a democracty in the middle east is a good thing. EVERYONE benefits from a democracy in these awful states who do not support free speech, who oppress women (horribly), and promote intolerance across the world. 2) This is a PERFECT place for us to establish a big, fat military base that makes it easy for the United States to project power (or at least intimidate) Iran. If you don't believe that, you're a pansy liberal, stop reading here. (kidding, sort of).

Problem - we currently have too few troops in too big a space in the midst of a civil war between Iraqi Sunnis and Iraqi Shite's (we'll forget about the Kurds who like us for the moment.)

Solution - PICK A SIDE. The United States should pull back to a single side. Pull all of our troops into a specific area for the Sunnis or Shites - whichever we decide is the most defendable. Concentrate our forces in a geographic area and calll it the "Shite" area for example. Pledge that the U.S. will fully defend the living daylights out of that geographic area. Pay off everyone in that area with social benefits (very liberal of me I know, but we're nation building here).

The net effect is a "stronghold" of U.S. power, with a populace that feels protected from it's enemy. The enemy is incapable of attacking with a frontal assault (see above - we're tough). Sure, they could still do a guerilla war, but the people are on our side this time.

And the alternate state? The one without our oversight and protection? Well, too bad! They elected to be a violent state. Can't help them. Sorry.

What's wrong with this approach? We stay in the middle east. We protect the peace. We build a democracy (yes, that does mean we can build McDonald's- what is so wrong with that?) . And we're still able to project power in the region.

Darfur

Okay, this is a post not based in a ton of fact, but I hope the logic is sound.

There is an element of the conservative side of the country that says no American troops should be deployed to an area of the world unless there is a "Clear and Present Danger" to the United States. The idea is that no American serviceman or woman should be put in harm's way unless there is a specific danger to the United States. This logic is sound and I agree with it to a point. There needs to be a real reason for the United States to commit forces to a part of the world that in turmoil. There is too much "bad stuff" going on in the world for the United States to solve everything.

However, I must part with the rest of my conservative brethren at a certain point. At this point, I must enlist the "Superman Principle." This may be a real thing out there somewhere in "thought land," but in my mind the Superman principal boils down to, "with great power, comes great responsibility." I know...right out of a movie, huh? The point is that Superman is a super-hero. As a society, we would frown on Superman passing buy a woman having her purse stolen, a bank being robbed, a car being stolen, and doing nothing. Superman has the ability to solve things that are BLATENTELY before him. With relatively little danger to himself, Superman has the power to prevent these evils.

The United States of America is the single remaining superpower in the world. We do not have some other-worldly power that Superman has. However, we do have the power to project our power in certain places in the world, with relatively small risk to ourselves.

Today, Darfur is this place. Unspeakable evil is happening in Darfur today (if all the reports are true, which it seems they are). We a "realtively" small projection of force, the United States could "enforce" some amount of peace in this region of the world.

This is not a small task. It does not come free. Super-people, in the form of our United States Military would be put at risk. They are NOT bullet-proof, but real human, heroes. However, these people are special. These people, in general are the type who are prone to use the power of the strong to protect the weak. Honestly, I bet if you took volunteers withing the already volunteer military, you would find a large force of fighting men and women willing to stop the genocide in Darfur. I don't make light of the sacrifice asked of these people. It is a big risk.

How is this an interest of the United States? Well, honestly, it's not. Darfur could be wiped off the map and it is not likely that it would affect too many citizens of the United States. The point is, that with the most power in the world, the United States has the moral responsibility to step in. The United Nations is the truely obligated body to step into this mess, but it is a wholley inneffecutal organization. Darfur has been called to the attention of the World. There is no walking by without noticing. The U.S., like Superman, has the power, and is morally responsible for not looking away. We should stop this violence, now.

Yawwwwwwnnnnnn

So I'm watching John Edwards on Hardball. OMG this guy is annoying. I would vote for Hillary before I'd vote for this ambulance chasing buffoon. I know that isn't highbrow analysis, but is anyone actually inspired by this guy?

And while we're at it, Chris Matthews, you ass kisser! It's supposed to be "hardball" and he actually preembled a question with, "i'm going to be a little hard on you now, is that okay?"

Ugh. Yuck.

Obama-fama-fo-fama (a.k.a. the candidate who isn’t “screechy”)

I doubt you missed it, but in case you did--this week marked what amounts to a “shot across the bow” at the powers that be in the Democratic party. Some people (including Time Magazine) will suggest that it was nothing more than chum in the water as part of a book tour, but Barack Obama’s ever present face this week looks to me like the start of his campaign for President in 2008.

On the one hand this is a fantastic display of an orchestrated PR campaign (we had the Bob Woodward State of Denial one a couple weeks back). Senator Obama is on the cover of Time Magazine, is the topic of the lead story for Harper’s, and was the star guest on NBC’s Meet the Press this morning. It was clear to me from both articles and from the MTP appearance that Obama sees what he thinks is a wide open gap in the 2008 Democratic candidate race that he thinks he can fill.

The running assumption for many months has been that Hillary Clinton has had the Democratic nomination all but sewn up. Poll after poll has shown her as the “leader.” Of course, this far out from the election all those polls are nothing more than “filler” while we wait for the real show. Apparently, Senator Obama agrees with me, at least in the estimation that “Hillary is no Bill.” The Time article even takes a swipe at Hillary without saying so, “He’s a liberal, but not a screechy partisan.” Wow. Everyone knows who Joel Klein, the author, is talking about.

Maybe the Democratic Party is actually waking up to what it’s been doing wrong lately. It would seem that at least someone in this party has a new playbook, and its strategy is to position Barack Obama as the level-headed, objective, and “bi-partisan” liberal. Sometimes the PR campaign’s talking points aren’t as easy to pick out, but both articles and Tim Russet’s interview touched on Obama’s co-sponsorship of a bill with Okalahoma’s “arch-conservative” (oooh, scary) Tom Coburn, requiring federal contracts to be published in a public Internet database. I am all for making it easier to watch the government spend our money, but at the end of the day it sounds like a fairly innocuous piece of legislation. Who cares really? No, to me it seems more obvious that this bill (or at least all the banging on the drum about it) is a way of positioning Obama as the Democrat that “conservatives can work with.”

Okay, so maybe that was a bit of the cynical marketer in me trying to deconstruct their PR campaign. Now I’ll try to be a little more positive. There is clearly an enormous void in American politics today. Obama alluded to it in the Meet the Press interview this morning and I whole-heartedly agree. Where are the Lincoln’s, the FDR’s, the Ronald Reagan’s? Clearly, there is no single figure on the American political scene that truly helps us define how we look at ourselves as Americans. Yeah, I like “W” more or less. I agree with several of his ambitions for the country and stands that he’s taking. However, as they say, he’s “no Jack Kennedy (or more appropriately no Lincoln, no FDR, no RWR for that matter.)

So there are two questions here. One is can Senator Obama (or anyone else) wrest away control of the Democratic Party from the “we’ll never leave” Clintons? I thought it very interesting that Tim Russert quoted from Obama’s book about advice he received from George W. Bush, (paraphrasing) “Watch yourself. You have an incredible amount of potential, but with all this attention you’ll have everyone gunning for ya. And not just from my side, but from your side too.” It will be interesting to see if Hillary “strikes back” (yes, Empire reference intended), and how. Secondly, and much more interestingly, is the charismatic Barack Obama the person America is looking for to step up and fill our void? More than once in the above sited material (PR talking point?) the question was raised, “well, Senator Obama, you’ve only been a Senator for two years, is there danger that you’re reaching too high, too soon?” By raising it early and doing it themselves are they trying to take it off the table? Just interesting I think.

I like Barack Obama so far. I have no illusions; this guy is a total liberal. I doubt I would ever vote for him. However, he makes the political scene interesting. And I must admit, it is refreshing to hear someone from the liberal side of the isle who isn’t hurling insults, isn’t a conspiracy theorist, and is well, just plain less…screechy.

How to Sell Shoes

I have the utmost respect for people who work in sales. I think in any company, it is probably the hardest type of work, often with little or at least inadequate support from the organization. There are a ton of different types of sales and salespeople to go with them, but for my money (literally) the best place to see pure sales instincts (a an individual anyway) is a shoe store.

I know retail sales is a thankless endeavor, but I was struck this past week by the enormous difference in training (or lack thereof) in two different experiences when buying shoes. The first experience was at a Rockport shoe store on Newbury street in Boston. Newbury street is one of the most expensive places (if not the most expensive) to rent retail space in Boston. The store is designed and laid out nicely, with a good size display space with half a set of stairs leading up to a second good size sales space.

Okay, so if you didn’t see this coming already, the “salespeople” in this store stunk. I ended up buying the shoes because I specifically wanted these Rockport shoes, but because the store hadn’t adequately trained these people, they completely left money on the table (or errr…in my pocket).

Okay, so contrast this with a second shoe buying experience. This one was at Johnston & Murphy in the Burlington Mall. This can’t be exactly cheap retail space, but certainly cheaper than Newbury street store fronts. In addition, the store was maybe a quarter of the size of the Rockport store, about the size of a medium sized trade show booth.

The difference in this store was night and day. The salesman was polite, and engaging. What’s more, when I asked to see a shoe he first insisted on measuring my foot. He then brought out a pair of shoes I was looking for, plus a different but similar pair for comparison. Then, once I’d selected a pair of shoes, the real selling started. He sold me shoe trees to go with the shoes, special shoe wax that matched the leather, and even tempted me with a belt that matched the shoes (passed on that one).

I would LOVE to know what the relative sales per square foot for each store are. I’d bet these Rockports the Johnston & Murphy store is more profitable!

Exxon Mobile keeps on truckin'

Congratulations this morning to Exxon Mobile for announcing the “second largest quarterly profit ever recorded by a publicly traded U.S. company.” Oh no…here it comes again. I can already hear the “controversy” over Exxon Mobile “gouging” the American citizens for their hard earned dollars.

I’m not sure I can say more about this than I already have in other posts, but because I know the alarmists of the world will be in full swing I’ll say it again. Exxon Mobile announced net income of 10.36 billion dollars. That’s profit (“for those of you in Rio Linda”) that the U.S. government will tax to finance everything from bombs to National Public Radio. That 10.36 billion in profit came from 99.03 billion in revenue. A profit margin of (drum roll please)…..10.46%.

10.46 percent is certainly an impressive number when taking into account that enormous size of Exxon Mobile’s enterprise. However, in the grand scheme of things, as I’ve said before, a ten percent profit margin is just not gouging.

So while I’m at it, let me congratulate the 83,700 employees of Exxon Mobile. You all have managed to keep yourselves gainfully employed at good paying jobs. You likely have mortgage payments you pay, and children you manage to feed and send off to college. You likely have a couple of cars you’ve paid for and maybe you even help support the credit industry by taking out a loan on one of those vehicles. Oh, and lest I forget, all 83,700 of you probably pay your taxes, from the wages you earn at Exxon Mobile.

So when you read the reports of the congressman and senators renewed calls for investigations into “consumer price gouging at the oil pump,” maybe you’ll do as I do. Roll your eyes, sigh, and hope that our elected officials will just let Exxon Mobile get back to continuing to help make the United States the most productive nation on Earth.

Disney War

“Disney War” by James B. Stewart is a great example of my favorite type of business book, a company profile with intimate access to characters and events. While Roy Disney and Stanley Gold’s revolt against the Disney board of directors in 2003 and 2004 is a major topic of the last quarter or so of the book, it really is the story of Michael Eisner’s twenty year rein as the CEO of the company.

After reading the book I came away thinking that Mr. Eisner is an absolutely fascinating individual. The book is blunt and pulls no punches. Story after story paints Eisner as an overly political being who is loose with the truth, either by design or because he forgets the difference. At the same time, he must be credited with the stunning growth in Disney between 1984 when he took the helm and 2004. The book takes you through the back story of a litany of TV shows, movies, personalities, both within Disney’s sphere and as part of the greater entertainment industry.

What emerges is the picture of two large stages of Eisner’s reign at Disney. The first is characterized by success after success, driven by the reinvigoration of Disney’s animation studios, the retail stores, and successes of both Touchstone and Mirimax live action films. The first ten years were characterized by the presence of Frank Wells, a seasoned executive who agreed to play second to Eisner’s leadership role when the two took over Disney in 1984.

The second ten years of Eisner’s term is marked by a steady decline. The book recounts the story of the loss of Jeffrey Katzenberg and the eventual $280 million payoff from an arbitration settlement. The matter at one time could have been settled for $40 million, but wasn’t, primarily due to Eisner. Next the story moves to Eisner’s hiring and eventual firing of super agent Michael Ovitz as President to replace Frank Wells who was killed in a helicopter accident. In amongst all of these stories are the ups and downs of the various executives at Disney, including the film studios, the animators, the “Imagineers,” ABC, ESPN, ABC Family Network, the theme parks in both Europe and the states, the retail stores, and relations with external companies such as Pixar.

The book is a great read, full of enough “boardroom drama,” smashing successes, and corporate intrigue to keep any MBA hooked well into the night. J

(incidentally, James Stewart’s book “Den of Thieves” about Michael Milken and Ivan Boesky is another great read (and winner of the Pulizer Prize).

Well, Michael Moore would be proud at least

The documentary film, “The Corporation” starts out reasonable enough, touching on the history of the modern corporation, but quickly devolves into a socialist diatribe on all the “evils” of capitalism. The film is essentially a list of categories of bad things corporations have done (or allegedly done), peppered throughout with the opinions of the likes of Michael Moore and Noam Chomsky. “Balance” comes through what appear to be highly edited clips of Milton Friedman and an advocate of private property (gasp!).

The film begins with the evolution of the modern corporation in the industrial age, describing laws that established corporations as the equivalent of an “individual” in society with the rights to buy and sell property, borrow money, and sue people under the law. As part of the definition of a corporation, the film offers “externalities,” as a basic characteristic and fact of corporate life, that is – an entity that engages in agreements between two parties that then pushes as much work or external burden on an unwary third party (presumably the public).

The film makers then go on to ask, “well if the corporation is a person, what type of person would it be?” What follows is an almost laughable case for why the corporation possesses all of the characteristics of a psychopathic person, going through a checklist of bad behavior traits that purportedly describe corporate deviance. The producers go so far as to bring in a “FBI profiler” who tells us that corporations do indeed posses all the personality traits of a psychopath. Milton Friedman thankfully points out that while corporations may not have a soul per se, it is the people who run that company that provide it’s moral compass (paraphrasing).

Then “The Corporation” runs through every corporate scandal in history, from pollution, to bad chemicals, to smoking, to accounting scandals, to sweat shops and even dips into IBM’s alleged aide to the Nazi’s as part of the Holocaust. We’re told that corporations only have one thing, the bottom line, and according to Michael Moore, the “problem comes in the profit motive.”

In fact, if I had to sum up the whole movie it would be just that, “an attack on the profit motive.” Not one shred of argument is given to the literally billions of benefits mankind enjoys due solely to man’s pursuit of profit (when is the last time you tried to grow your own apples? Build your own combustion engine? Concoct your own heart medicine?) No, instead the “reformed” CEO of a carpet company, Interface, explains that “every living system on the Earth is in decline,” that, “no scientific paper in the past thirty years would contradict” this, and that it is man’s pursuit short term profits that is to blame. He goes on to “confess” that “I have been running Interface like a plunderer – some day they’ll put people in jail for that.”

This movie is fodder for the easily swayed, simple minded folk. “Proof” that corporations and the profit motive is evil comes in many forms. We’re given Mark Barry, author of “Spooked: Espionage in Corporate America,” who declares “I am a spy,” and tells of a National Security Agency meeting that has people from major corporations attending (gasp!). We’re given a “trader” who’s name I didn’t pick up who tells us the first thing that “every” trader thought just minutes after the September 11th attacks was, “the price of gold will soar!”

One after another we’re given reason to hate “the man.” Certainly some have merit in that they were the “bad apples” the film mocks. For many others, they’re backed up with the loosest of “facts” and philosophic opinions. Curiously, the film takes the wind out of its own sails when the major proponent against child labor in the third world (a good thing of course!) declares when speaking of The GAP – “you can still reach these companies – you can still have an effect!” Some of us would point out that shaming a company into doing the right thing is A- good business, and B- part of the “market forces” that these people so deride.

Michael Moore (who else) helps us fade to black with thoughts on the irony of his own claim to fame. He points out that he himself is distributed and in fact promoted by large corporations. Why? Why would they do that he asks? It’s the “greed flaw” he tells us, “they don’t believe in anything.” Mostly I picture this film’s target market saying “yeah. Yeah man, they don’t believe in anything!” I wonder if that same person will stop to ponder the part of the “greed factor” that made Michael Moore independently wealthy. Is he just exempt from that?
Watch it if you will, but I find it’s arguments pathetically lacking. Certainly there are many examples (endless?) of people as part of corporations committing immoral and illegal acts. However, is it at a hirer rate than individuals acting in this manner? Malfeasance should be pursued, investigated, prosecuted, and punished; however, the corporation itself is not evil. Corporations today provide one vehicle for millions upon millions of people to serve and be served by their fellow man. Further, they are motivated by the “profit motive” (as would an individual on his own), which in turn can be invested to grow capacity for further service.

Buy MSFT

Since I first read “One Up on Wall Street” in the early 90’s, I’ve been an ardent fan of Peter Lynch’s “buy what you know” strategy for stock picking. Unfortunately, it’s taken a few years for the rest of the lessons in the book to have taken hold. So far, all of my “successful” stock picking has been done in virtual portfolios on the web. You see, the trick to investing is only half solved by finding the right companies to buy shares in. The really hard part, and perhaps the most difficult skill in business, is determining the right valuation for a business. Because of this, it’s very easy to fall in the trap of buying the right shares, but at the wrong price. (Picture is of Ray Ozzie, CTO of Microsoft, and former CEO of Groove Networks)

So I patted myself on the back the other day when I realized that as I get older, I am at least starting to ask the right questions. I spent about twenty minutes going over ratios and numbers for Microsoft, trying to decide if this is the right time to buy.

The reason I spent this time was that news from last week opened an excellent buying opportunity. As part of its earnings announcement, the company laid out plans for investing $2 billion dollars in R&D in 2007, a number far higher than expected by analysts. This means that Microsoft is reinvesting profits (spending their money) because they think they can make more by spending the money now. However, the immediate effect was that Wall Street saw that Microsoft’s projected earnings would be far lower for the coming year. Shares got whacked for 11% of their value, or $32 billion in market value. To give you an idea of just how big Microsoft is, that $32 billion would have been enough money to buy all of Costco (yes, the entire company). That’s a lot of money to lose in a matter of hours.

It’s very popular these days to follow Google, which is considered “the” growth stock of the tech sector these days. You’ll see story after story about Google challenging Microsoft’s dominance. I believe Google has a decent chance, but I’ve been in computing industry for a few years now, and one rule I continually come back to is – don’t bet against Microsoft.

As an investor (or “pho” one anyhow), I couldn’t go near Google with a ten foot pole right now. Trading at $408, Google just looks too expensive these days, not because of the $408 number, but because of it’s Price to Earnings ratio, which is at 71.95. That means, at 408 dollars, it would take you close to 72 years (at current earnings) to earn your money back. Of course, that in and of itself does not make Google a bad investment, it’s just one indicator. A lot could happen and will change.

No a better investment at this time (IMHO) is Microsoft, which because of this latest hit to the stock is trading at around $23, a P/E ratio of 18.7. Though a P/E ratio is best used as a comparable with companies in the same industry, a P/E of 18 is relatively low overall (at least for the tech sector – not some industries). For example, the five year high P/E for Microsoft is 57.41, which means MSFT is trading at one of its lowest prices in years.

So why buy Microsoft in the first place? There is a great little article in the May 15th Business Week called “Mixed Signals From Microsoft.” As one of the most widely held stocks in the world, investors are constantly watching the company for signs of what it will do next. Part of the current consternation (and the reason I patted myself on the back for asking the question) is what type of buying opportunity Microsoft currently represents. Investors like predictability, and as such, they like to classify stocks into “types.”

Microsoft is thirty-one years old, and in many people’s minds has passed the stage of “growth” stock and moved into more of a “value” type stock. This is why the market reacted poorly to the $2 billion dollar R&D investment. That indicates to the street that Microsoft still considers itself a growth stock. Microsoft is seen as a value investment that isn’t going to grow much more. Certainly it has some characteristics of a “cash cow” investment. Microsoft generates over one billion dollars in free cash flow…every month! The company is wildly profitable (incidentally, way more than Exxon Mobile).

So again, why buy Microsoft? Well, in my admittedly armchair opinion, Microsoft is still a growth stock. I wouldn’t bet against Microsoft yet and here is why. Number one, Bill Gates and Steve Ballmer are still in charge. Companies that are helmed by their original founders typically still are managed for growth. Number two, Microsoft is a “gamer,” they compete better than anyone, and they do so through big bets (see recent Fortune article about Ray Ozzie and Microsoft). Number three, well, in terms of revenue they can always grow. Microsoft had revenue of over $39 billion last year. A big number to be sure, but another computer company, IBM had sales of over $91 billion! Sure, IBM has a different mix of products, but Microsoft has proven its ability to move into additional markets in the past.

A disclaimer. It is likely too late for you to get fabulously rich from MSFT stock. It’s not going to climb another 61,000%, like it did from its 1986 IPO until now. However, as a solid, blue chip investment with good growth opportunity, I think Microsoft’s current price makes it buy.

strong-selling cinnamon dolce latte

Yeah, yeah, yeah, I'm always blathering on about politics, but my true love in life is the WSJ, Forbes, and Fortune. Which is why I couldn't help but love the line from this earnings report on Starbucks today:

"Starbucks Corp. reported that fiscal second-quarter earnings rose 27% as it rolled out new products, including a strong-selling cinnamon dolce latte, and drew new customers into its stores."

Ha! I love a headline with billions of dollars at stake that calls out something called a "cinnamon dolce latte" as a key to revenue growth. Only in America!

As a person who's biggest vice may actually be coffee (at least it is in the running), I love stories about Dunkin Donuts and Starbucks. I find it totally fascinating that McDonald's, a company synonmous with hamburgers can actually affect Starbucks earnings by pushing into the coffee space.

I swear, if Starbucks could EVER get food of any sort right (breakfast, lunch, desert, it's all awfully mundane) they would be an even bigger superstar! Oh well, I'll settle for my Grande vanilla Latte.

Higher Ground

Sometimes the bad guy "gets away." While on occasion I have been uncomfortable with it, I have always been a death penalty supporter. There are some people who commit such horrible acts that the truely humane thing to do is to put them down, like a mad dog. I know if some of the things people do to people were done to any of the people I love I would be insane with feelings of wanting justice through full retribution. I don't see why it should not apply to some of these animals just because I don't personally know or love the victims. Someone always does.

So go ahead and throw my name on the pile of the disappointed people to see that Zacarias Moussaoui escaped the death penalty and instead got life in prision. If this isn't a perfect example of the reason for this form of justice, what is?

However, since i have no personal control or influence in the matter (okay, maybe a letter to a congressman, but he got a fair trial), there is not much else to stew on. I guess the biggest problem with this verdict is no so much the loss of a chance for justice, but instead the overwhelming message of vulnerability we send to the world. What terrorist in his "right" mind isn't reading the news today and thinking, "America is weak. They found him guilty, and they let him live!"

Our consolation in this matter I guess can only be that the United states truely does occupy the moral high ground in this matter. Yes, I'm saying it, we are better. Only in America would such a brutal murderer be given a fair trial, and actually let this person off with their lives? (Unless of course you're just an appeaser like Germany and send the terrorists back home). Only in America is it possible for an organized government to say, we'll do our best to pushish you, but fairly, and should you proove your case, we will leave your eventual fate in the hands of God.

Witch Hunt

I’ve written about this before, but since the issue won’t seem to go away I can’t help but expound further on this opportunistic move by some in congress to attack “wild” profits by big oil.

This is the most disingenuous, opportunistic attack on American business by the United States congress in years. This is motivated by politicians looking to curry favor with people who either can’t understand, or have not taken time to understand the implications of what they propose.

In 2005, Exxon Mobil made a profit of $36.130 billion dollars, the “largest” profit in U.S. history. In fact, this profit is so large that it is bigger that according to Fortune it is larger than the profits of the next four companies on the list combined! No one is denying that’s a lot of money, but the argument of many Senators and Congressman only focuses on that single number by itself. Anyone who has attended business school (and paid attention) understands that a net income number by itself is meaningless. Without further information you can’t compare this net income number to any other company’s earnings with any meaning. This makes the description, “the largest profit in U.S. history” totally fallacious. The real question is “how much invested capital did it take to make that $36 billion in profit?” Without answering that question there can be no comparing bit oils profit.

Anyone who has taken a basic accounting class understands that investors and managers have a whole host of different ratios that help them compare one business to another. Return on equity is an investor’s measure that helps you evaluate an investments potential. Return on assets is a measure of management’s ability to create value given all of their available assets, equity and debt. The most common measure of profitability used to compare companies’ profits is profit margin or net income divided by revenue. Profit margin is most useful when comparing companies in the same industry – that is, given similar market circumstances, which company is best using it’s assets to produce profits. In this way, you can compare a very large oil company like Exxon Mobil (339 billion in sales) with a smaller petroleum refining company like Holly (3.2 billion in sales) to see which one is a better operator in its industry (Exxon wins this round with 11% profit margin versus Holly’s 5%).

Measuring profit margin’s across industries has less value when measuring cross industry. However, when looking to measure a purely theoretical question like “who is the most profitable company in the world?” it is a far more pure and better measure than a flat net income number. The flat income number is just a number, profit margin actually conveys real information.

So in that vein, how profitable is Exxon Mobile. For fiscal year 2005 the company posted earnings as we said of $36 billion dollars on over $339 billion dollars in sales, producing a profit margin of 11%. Let’s stop there for a second. This is a fantastic feat. It should take a up a separate post, but Exxon Mobile’s management deserve all of the high compensation retirement packages they earned. Managing such a vast enterprise that produces $339 billion in sales is a monumental task (it’s “harder” to grow a large company than a very small one, especially in a mature industry). Managing it for a double digit profit is something to be applauded. However, as profit margins go, that is “most profitable company as a percentage of their sales,” there are hundreds of companies more profitable than Exxon Mobil.

Flipping through the April 17th issue of Fortune, including the annual Fortune 500 list unearths tons of companies with higher profit margins than Exxon Mobile. An excellent example is banking. Of the thirty companies in the Fortune 500 in category of Commercial banking how many do you suppose are more profitable than Exxon Mobil? The answer is, twenty-eight. Two companies have the same 11% profit margin as Exxon Mobil, all the rest have profit margins ranging from 13% (Commerce Bancorp) all the way up to 27% (North Fork Bancorp). Where’s congress? Shouldn’t we be taxing these “unfair” profits?

Okay, so maybe that’s a bad category. Let’s go to a different category. Computer software. Of the ten companies in the Fortune 500 from this category, how many are more profitable than Exxon Mobil? The answer is seven. Microsoft takes the lead with a 2005 profit margin of 31% (nice work if you can get it).

The list of companies with a higher profit margin than Exxon Mobil goes on and on. McDonald’s 13%. Plum Creek Timber 22% (obscure, I know). Illinois Tool Works 12% (should we protest?) Verisign 24%. FM Global 20%. Google, cute, cuddly Google – 24%!

The bottom line is that Washington D.C. hacks need to immediately stop demonizing business in the United States of America. There are most definitely “bad guys” in big business, ala Enron that need to be watched. Government absolutely should play a role. However, too often in this country legislators choose to make business (and big business in particular) into the bad guys. Large enterprise in this country is the “engine of democracy.” It is the back bone of this country. It employs our citizens, provides investment opportunity for millions (think of your 401k and your dad’s pension), and generates revenue from which all taxes direct or indirect are derived.

The most ironic part of this whole laughable suggestion by congress that big business is gouging the people is that it’s in fact congress that is gouging us. They’re like the “good” Samaritan that tells you someone stole your wallet, wall pick pocketing your car keys. If congress wants to bring down the price of gasoline and stop price gouging, consider cutting gas taxes, which the U.S. gets revenues estimated to be twice the size of the profit that big oil is making from each gallon of gas.

The Smartest Rats in the Room

I finished reading Bethany McLean and Peter Elkind’s account of the collapse of Enron, “The Smartest Guys in the Room – The Amazing Rise and Scandalous Fall of Enron,” last fall. So I was really interested to see the documentary based on the book, “Enron, The Smartest Guys in the Room.” The book is a great read for those that like a business story ala “Barbarians at the Gate,” or “Den of Thieves.” The authors bring you back to the go go 90’s feeling at Enron, and give you a good sense for the various characters involved. The book and documentary together are a great one-two punch, they make this tragic story come alive.

At it’s biggest point, Enron was the United State’s seventh largest company, with a market cap of over seventy billion dollars. Enron’s descent into accounting fraud began in the 1990s when the company won an okay from it’s auditors to use a type of accounting known as “Mark to market.” Essentially, this type of accounting allows for the booking of _potential_ future profits as earnings on a current income statement. That means that when Enron won a large, long term deal it could recognized the future estimated worth of the deal to Enron. While allowable under GAAP for certain types of business, mark to market was a wholly inadequate form of reporting to give shareholders insight into Enron’s business. The company quickly became addicted to this extremely subjective form of revenue recognition, setting the stage for future, much more egregious blurring of the accounting lines.

I think it was useful to read both the book and see the documentary, though I found the two diverging at points. Certainly each takes a “point of view” of either the authors or the director/producers. While they mostly follow the same path, in fact, Bethany McLean the book’s co-author is interviewed throughout the film, the documentary diverges in spots.

One path the documentary goes down that I did not remember so much in the book was the insinuation that the Bush family is in Ken Lay and Enron’s back pocket. While I don’t remember that from the book, the guilt-by-association is blatant in the documentary. It may be true that the Bush’s gave improper favors to Enron or Lay, but the documentary doesn’t come out and say that, and certainly offers no proof of any sort. In merely insinuates. It’s a curious inclusion in what otherwise stacks up as a credible indictment of Enron’s senior executives.

The other topic I found to be somewhat non-genuine was the “rank and yank” example of Enron as a really tough culture to work in. I’m sure Enron was a macho/tough culture, “Guys with Spikes” as they put it, and I’m sure they did in fact use a tough 1 to 5 ranking system where they fired or moved out the bottom 15% of performers. What struck me as funny I guess is that the company best known for “rank and yank” (a pejorative term for philosophy that has very pragmatic and humanistic reasons associated with it) is one of the business world’s most respected, General Electric. Of course, the way the system is applied has a lot to do with the what you get out of it, and it does sound as though its practitioners at Enron were, well…bastards.

One of the best pieces of watching the documentary after having read the book are the actual recordings of various Enron players. On one infamous earnings call, after the deterioration of Enron had begun, an analyst presses CEO Jeff Skilling on Enron’s inability to produce a balance sheet at the same time it published its income statement. Skilling, the CEO of the seventh largest company in the U.S. (though at that time it may have fallen some), is heard clearly on the line calling the guy an “Asshole.” This unprofessional behavior was just one of many new signs that Enron was not what it appeared to be. In other recordings, you hear energy traders at Enron actively (and perhaps illegally) manipulating California’s deregulated electric grid- adding to California’s rolling black outs.

At any rate, I highly recommend both the book and the documentary. The two together give a great overview of what happened at Enron. The book and the film give great insight into the people that were responsible for Enron’s fall (Lay, Skilling, Fastow, and a host of others), as well as the intricacies of some of their misdeeds. The descriptions of how Andy Fastow, Enron’s CFO, used Special Purpose Entities to manage and twist Enron’s earnings, and at the same time get himself rich, is eye opening. After reading these sections alone you can’t help but think that Fastow’s plea bargain, getting himself only ten years in prison, was criminal in of itself.

It will be interesting to see how things play out in the Ken Lay/Jeff Skilling trial. While the news accounts certainly draw out and paints these top level characters as the bad guys, the book unearths not just them but the system of interlaced people, investment banks, corporations, accounting firms, and lawyers that all failed, and all contributed to this catastrophe.

The Fog of War

“Every Military commander who is honest to himself will admit that he has made mistakes with the application of military power that has resulted in needless deaths.”
-Robert S. McNamara

You have to hope that your leaders are the type of people who at times take time to step back and reflect on their policies and their actions. A great Saturday afternoon “time out” activity for George W. Bush and Don Rumsfeld would be to sit down and watch the documentary, “The Fog of War: Eleven Lessons from the life of Robert S. McNamara.”

For seven years in the 1960s Robert Strange McNamara served as the United States Secretary of Defense. Weeks after starting as the first outside-the-family President of Ford Motor company, President Kennedy appointed McNamara as Secretary of Defense, despite McNamara’s uncertainty whether he was qualified for the job. Serving first under Kennedy, and then under Lyndon Johnson, McNamara held the office during a time that, as McNamara puts it, “on three different occasions we came within a hairs breath of nuclear war with the U.S.S.R.”

This film is interesting in that McNamara, eighty-five at the time of the filming, reflects and shares with us what he’s learned from his experience as a war fighter. McNamara lists eleven “lessons” he’s taken away these experiences, and the film fills out the background that has lead him to these insights.

The film leads us from McNamara’s WWII experience, to the Cuban missile crisis, and to the events that led to the United States’ entry and eventual escalation of the Vietnam war. What comes out is sobering parade of human miscalculations and brutality. In WWII, McNamara served in the Air Force’s statistical air corps. From there he analyzed the efficiency of delivered force against Japanese targets, specifically the fire bombing of Japan. He sites the example of 100,000 Japanese civilians killed in a single night as a result of fire bombing and questions the morality of this decision (That was just one night, the segment on 67 Japanese cities and the percentages of them that burned is scary). Is that okay in war? Was it the right thing to do in order to fight the war? McNamara points out that if the United States had lost, General Curtis Lemay who made the firebombing decision and himself would certainly have been tried as war criminals by the Japanese. In the film McNamara ponders, what makes it moral if we win, but immoral if we’d lost.

Near the start of the film McNamara takes us through the Cuban missile crisis and his revelations in the 1990s when he actually met with Castro to discuss the crisis. He asked Castro – did you know the missiles were there? If so, would you have told Kruschev to use them, and if you would, what do you think would have happened? I won’t spoil it, but it we came closer to nuclear war than we even knew. McNamara’s point is that Kennedy, Kruschev, and Castro were all very rational men, but still we came so close to madness.

The film is fascinating. It has many interesting side anecdotes about JFK and LBJ. McNamara was actually the person who walked the ground of Arlington Cemetery, found the most beautiful spot, and proposed it to Jackie Kennedy as the spot to bury JFK.

The piece I think would be most interesting for George W. and Don Rumsfeld to ponder was near the end. McNamara believes that as the lone super power the United States should never apply its force unilaterally, “if we can’t persuade nations with common values of our case, we should re-examine our reasoning.” McNamara was talking about Vietnam, but clearly this question has meaning today (incidentally, the U.S. is not applying force in Iraq unilaterally, but certainly it could (and is) be debated if the degree to which it has multi-lateral support satisfies McNamara’s suggestion.

Where McNamara clearly had the most impact and of course what he is most known for is the U.S. escalation and execution of the Vietnam war. It is his belief that had JFK lived we would have gotten out far sooner, and that Johnson held the responsibility for the escalation – though he paints LBJ in a sympathetic light. The film, and actual recordings illustrate the clear hesitation, and conflict these two men had around escalation the war to include significant ground troops.

In the end we have some very interesting lessons, but even McNamara leaves us without an “answer.” He is not so naïve to think we’ll just end all war. His sum up of the film is where it gets its name. He describes the term “Fog of war” and what it means to him. Essentially that a war is so complex that it is beyond the capability of any person to understand all of the variants, and the result as that we as humans needlessly kill people. “It isn’t that we aren’t rational, we are, but reason has limits.”

Accountants just want to have fun...

The Wall Street Journal's Op Ed page is a never ending stream of blatent common sense. I love it. I'm not talking about the featured editorials that can come from readers (though they're usually of interest) but the ones that represent the opinion of "the paper." Whoever wrote today's brief, six paragraph treatise on the coplexity of our federal income tax code should be given a medal.

It's so short I wish i could just reprint it here. However, since that' s probably illegal, I'll just give the pointer above. For those of you without WSJ access it boils down to -- our current tax code is so complicated that most "professional" tax preparers cannot prepare tax returns error free at high rate. Washington's answer is is to that is to propose more training or a "certification" for tax preparers. Of course, this "bass ackwards" Washinton D.C. logic would mean higher costs for cititzens looking for help complying with this tax code monstrosity, and would not garuntee better results.

The real answer is to fix this Frankenstein of a tax code.

Mitt on the rise

Well, for some time there has been little doubt that Mitt Romney is running for President. His op ed in today's Wall Street Journal entitled "Health Care for Everyone? We Found a Way," only confirms the idea.

I have to admit that so far I've been pretty skeptical about the new Massachusetts health care plan. Governor Romney's article is worth a read, as it helps explain the plan, and acknowledges that it's just a first step. As I mentioned in the last post, I love the concept of states experimenting with different systems to see what works. "Laboratories of Democracy," as Cokie Roberts put it on This Week with George Stephanopolous...er...this week.

Governor Romney covers all bases. He admits that he's swinging for the fences, but would be happy if it just forwards the cause. He praises bi-partisanship, but takes a dig at Democrats for the unnecssary $295 clause they put in. He even ackowledges concerns of his libertarian friends.

Why there are 50 states

There is a good op-ed in the Wall Street Jornal today by Arnold Kling entitled "Bill of Health." Massachusetts has made national news this week by enacting a bill that forces everyone in the state to have health insurance, one way or the other. Through a collection of subsides and tax incentives the Commonwealth believes it solved the state's health care issues.

I'll let you read Mr. Kling's discussion, as his explaination of why this bill is completely silly is far better than I would do. Essentially, there is no such thing as a free lunch. Someone has to pay for all of this health care, and it appears to me that Massachusetts has just decided to shift even more of the burden to we taxpayers.

What I actually like about this whole issue instead had to do with the role of State government and illustrates just one reason that the United States is great. Last summer I had a rollicking conversation with several friends about the purpose of State Government vs. Federal government. My point is that people at a macro level move to wear conditions are best for them. I tried to illustrate by pointing out that people moving to an area often choose the neighborhood to move into based on the quality of a school system. They didn't buy that (bewildering to me to this day) they belived people don't move based on econmics (again, bewildering, no wonder they don't "get it." ;-)

At any rate, this health care issue is a great example of why we have fifty states rather than one big country. Massachusetts has chosen, through self government to go in one direction. It might be right, it might be wrong - only time will tell. My guess is that Masshchusetts insurance and or tax rates are about to go much higher, but we'll see. The good news is that in a free country with fifty different systems of state government, we are free to move among these different systems as we choose, and still be bound together by a larger whole, and enjoy the protections it affords. Competition almost always serves the consumer!

New Hampshire anyone?

Rosie's Family Cruise

I think sometimes I get a bad rap from some of my Liberal friends because we always end up spending time arguing about issues we disagree on. Well, every so often I'll freak out one of my Liberal friends by agreeing with them on an issue traditionally "owned" by the left. One of these is gay marriage. Honestly, it has nothing to do with any liberal leanings of my own, but more due to my Libertarian streak. What's funny is that this issue is so decisive in some circles that people who call themselves Libertarian (advocates of freedom) come out against it. I'm thinking specifically of Jay Severin, on of my favortie radio talk show hosts. To be honest, Jay strikes me as a bit homophobic (I could be wrong); however, to his credit, his arguments against gay marrige are based on logic, and the premise that gay people should not be granted rights the rest of us don't enjoy. For the record, I think he should get over it.

The thing that popped this issue into my mind was actually Rosie O'Donnell's appearance tonight on Hardball. Usually, I can't stand Rosie O'Donnell. She typically typifies (at least for me) the screeching, wild-eyed liberals that seem to be so angry that they're totally unwilling to "come to the table" to discuss anything in a reasonable manner. But despite my own knee-jerk feelings about Rosie, the focus of Chris Mattews interview was something that I think is really noble use of her personal resources.

Rosie is the subject of a new HBO documentary entitled "All Aboard," which depicts a new venture she has started called "Rosie's Family Cruise." It wasn't clear whether this is a for profit or a service venture, but either way it's a good cause. Rosie's family Cruise is a cruise ship vacation that provides a friendly environement for gay familys with children. The idea is based on the reality noticed by many gay couples -- it can be really tough to be the child of gay parents. The family cruise is a vacation that gay families can take their children on and be around other families "like their own." I think this is a great idea, and an opportunity for a great positive experience for children who may not feel like the rest of the kids at school.

As for gay marriage, my message for all conservatives is that they should "get over it." The "high ground" on this one is grounded in liberty. This is the land of the free, meaning as long as you're not infringing on other people's rights, we'll take embrace you into our culture. Of course, the flip side of this is gay people respecting the right of others to disagree based on their religion. You don't need to disagree, but those fringe players looking to "stick it" to the religeous types by dancing in chaps in the St. Paddy's day parade....well, you're not helping anyone's cause.

Do you know who *I* am?

Those whacky Democrats! The party who always lays claim to “protecting the little guy,” apparently doesn’t apply that spirit of public service to those who wear a uniform and get paid by the hour. Normally I wouldn’t pick on all of the Democrats for Georgia Representative Cynthia McKinney’s preposterous, but singularly executed behavior toward a Capitol Policeman this week. However Representative McKinney’s pulling of the race card in what is so obviously a case of hubris run wild is so typical of the left these days.

When asked about the incident with the Capitol security officer, Representative McKinney insisted the reason she was pulled aside was racial profiling adding, “"Let me first say this has become much ado about a hairdo." The really sad part of the political correctness movement is that it’s put the scare of the “r” word so deep in American society that it has become permissible for the atom bomb of political insults to be dropped on even the most innocuous of events. Don’t get me wrong, disobeying and even overtly disrespecting a uniformed police officer is pretty heinous behavior.

This Conservative Republican will go on the record and say this little incident certainly doesn’t warrant the time of the Justice Department or the U.S. Attorney for the District of Columbia. I mean honestly, we’re going to waste the time of a Grand Jury on this incident? What I would say is that with all the real negative effect of true acts of racism in the world today, are you, the people of Georgia’s 4th Congressional District really happy being represented by someone who screams “racism” to cover up her own bad behavior?

Lord of War

I've just watched the most disturbing movie. I'm a big Nicholas Cage fan. He often plays either the likable everyman or the quirky but somehow empathetic misfit. In Lord of War, Nichloas Cage plays an arms dealer. His character, Yuri, sells arms to buyers all over the world, all the while telling himself that he is not responsible for the carnage and genocide the weapons he sells cause.

Throughout the movie, Yuri sells arms, especially the AK-47, to countless armies around the world, but especially in Africa. Yuri is thoughtful, even philospohic about his profession, and the havoc it brings to the world. His character is almost "Tony Soprano-ish" in that he is sympathetic and yet horrible. He lives the life we all live, wishing for success, and loving the unatainable beauty queen from afar. He gets her, but squanders the life he's built becuase the one thing he is good at is evil, and fueled by his own greed. The movie is good, because Nicolas Cage is able to humanize the character, but even still you end up absolutely hating this sublime character, and understanding that the world actually does contain people just like him.

This is a thoughtful movie. Especially for someone like myself who fancies himself a "constitutionalist," and supporter of the second amendement. You can't watch this movie and still tell yourself "guns don't kill people, people kill people." Gun ownership is something I admit I am completely conflicted on. It's a genie I wish that the United States could put back in its bottle. In reality you can't though. In our society, if you banned guns, only the criminals would own them. On the other hand, organizations like the NRA which oppose simple checks and balances like waiting periods to purchase firearms are short-sighted. Sportsman and citizens looking to defend themselves will happily comply with controls like waiting periods, because they are honest citizens who believe in the law. Opposition seems nothing more of an opposition sponsored by the corporate gun lobby. There may be points of view i'm not yet considering (yes, that's a hedge). Still, that's the kind of comment you can feel free to hold me to someday when i run for office on a conservative ticket. Guns aren't black and white - they a hard issue that good men and women must make thoughtful, educated decisions on.

Forty-Second Boyd

Robert Coram’s “Boyd – The Fighter Pilot Who Changed the Art of War,” is a great read about Colonel John Boyd (U.S.A.F), the man many consider the greatest military strategist since Sun Tzu. Coram paints the picture of a larger-than-life man who had a “damn the torpedoes” attitude toward everything bureaucratic and wrong about the military. His inability to temper opinions in front of higher ranking officers and the military establishment in general undoubtedly severely limited his career. At the same time the breadth of his contribution toward military thinking and the defense of the United States is astounding.

John Boyd is arguably the best fighter pilot in American history. In the 1950s he earned the nickname “Forty Second Boyd” at Nellis air force base where as instructor he defeated all comers in simulated air to air combat in forty seconds or less. His abilities as a fighter pilot gave him unique insight into the full potential and glaring weaknesses of the fighter jets he flew.

Boyd made an unheard of transition, from fighter jock to scientist and engineer. During this transition Boyd published an article called the “Aerial Attack Study” that quantified air to air combat in terms never put on paper before – this represented a first step in changing fighter combat from a pure “gut feel” practice to a science that could be learned. He went on to totally revolutionize the field with the development of “Energy-Maneuverability Theory.”

“The E-M Theory, at its simplest, is a method to determine the specific energy rate of an aircraft. This is what every fighter pilot wants to know. If I am at 30,000 feet and 450 knots and pull six Gs, how fast am I gaining or losing energy? Can my adversary gain or lose energy faster than I can? In an equation, specific energy rate is denoted by “Ps” (pronounced “p sub s”). The state of any aircraft in any flight regime can be defined with Boyd’s simple equation: Ps = [(T-D)/W]V, or thrust minus drag over weight, multiplied by velocity. This is the core of E-M.” p.147-148.

From this simple equation Boyd was able to determine the performance metrics of both U.S. aircraft in use and Soviet MIGs, and their relative strengths and weaknesses.

To a civilian, reading “Boyd” is an eye opener into the ways the United States military approaches defending our country. Movies like “Top Gun” might give the impression that skilled fighter pilots have been a celebrated and highly valued part of America’s defense. Surprisingly, in the halls of the Pentagon nothing was further from the truth. The various military services, and the Air Force in particular followed a philosophy of interdiction that led to a “bigger, faster, farther” mindset when it came to aircraft and weapon system design.

Boyd, with the help of his “acolytes,” six men who with Boyd became known as “the Reformers,” was able to beat back the “bluesuiter” careerists at the Pentagon to radically influence multiple new plane programs. This included the F-15, the F-16, and the A10 “Warthog.” The F-16, known as the “light fighter” was a plane that no one in the Pentagon wanted and one that Boyd effectively shoved down their throat (with good reason). Based on E-M theory a lighter fighter has far more ability to lose and then regain energy, making it a far more maneuverable, and deadly weapon. This was in direct opposition to the Air Force’s theory of “push button, let missiles do the rest” warfare.

And that, as they say, is where Boyd’s career gets truly interesting. After making internal enemies throughout the Pentagon (mostly through his hard charging, disrespectful attitude toward incompetence and careerism, and of course direct opposition to status quo thinking) Boyd retired as a full Colonel in 1975. From there he spent the next 15 plus years working as a consultant to the military virtually for free (Pentagon rules forced him to get paid something, so he accepted one day of pay every two weeks). During this period of his life Boyd became a true scholar. As Coram describes it Boyd, interested in how he initially discovered E-M delved into works from all disciplines, eventually publishing a work entitled “Destruction and Creation.”

Boyd continued to have massive, though unofficial influence at the Pentagon. Through mentoring and support of his “acolytes,” and through a briefing entitled “Patterns of Conflict” that he delivered hundreds of times, Boyd began shaping the thinking on how the United States should fight wars. A favorite of few generals, Boyd’s thinking found traction with those open to new ways of fighting, including back-channel relations with multiple high level people such as the Secretary of Defense.

Through the “Patterns” briefing, Boyd’s developments, including the OODA Loop found their supporters. Ironically, it was the Marines, not the Air Force that primarily adopted Boyd’s thinking. One of the Acolytes, Mike Wyly had fought in Vietnam and recognized the error of “straight up the middle” attrition warfare practiced by the U.S. Military. Wyly was in a position to influence Marine combat training using Boyd theories (though he experienced the same resistance that eventually ended his Marine Corps career).

Boyd’s most impressive accomplishment is the performance of the Marine Corps in the Gulf war. U.S. strategy in that war, with the support of Secretary of Defense Dick Cheney and General Colin Powell was unquestionably influenced by Boyd and his work:

“What is still not generally known to the public is just how well the Marines performed in the Gulf…. Three days before the war officially began, Myatt’s (General Mike Myatt) men raided deep behind Iraqi lines. They bypassed strong points, forgot their flanks, and penetrated so deeply and caused such confusion that the Iraqi Army rushed in reinforcements against what they anticipated would be the main thrust of the American invasion. Then they began surrendering by the thousands. Nowhere can be found a better example of Boyd’s ideas on “folding the enemy in on himself” than in the fact that some fifteen Iraqi divisions surrendered to two divisions of Marines.” p.424-425

Today, a wide school of thought in both military and business strategy is based on Boyd’s work. Web sites such as www.belisarius.com and http://www.d-n-i.net/ showcase Boyd’s ideas, as well as hundreds of articles and books. “Boyd,” is a great read about someone who is clearly an American hero.

Oh Get a life!

UGH, sometimes the network news drives me out of my mind. They make stories where there are no stories! David Gregory of NBC News is such a moron. Tonight he's all indignant on Hardball that the Vice President's office waited a day to inform the press of the V.P.'s hunting accident.

David Gregory, it's not about you. "We have difficulty getting answers to these questions because of decisions the V.P. and his staff made."

It is a hunting accident. It is NOT politics. What does Dick Cheney's mis-handling of a shotgun have to do with ANYTHING relevant to anyone else in the country.

Chris Matthews, "Why was this handled so differently?" Chris, it's handled differently because it is the V.P. of the United States. For the love of God, get a clue. Stop acting so indignant. It's disingenuous of you. Phony.

State of the News...

It’s 9:17 p.m. EST. President Bush has been presenting his 2006 State of The Union speech for about 4-7 minutes or so. I’m watching the speech and surfing the web at the same time and can’t help but notices that both Boston.com and the WSJ already have published articles on the speech. Yes, they’re media outlets that get text of the speech ahead of time, but is it really journalism to have the headline “Bush to say ‘America is addicted to oil’ in Speech,” on Boston.com and “Bush made lessening reliance on Mideast oil….” As the top story on WSJ, even before he’s STARTED the speech – let alone finished.

It’s 9:21 now. CNN.com says, “Bush: We will Fight for Freedom,” and goes on to say “President Bush used his State of the Union speech to spread his vision of a world free of dictatorships and terrorists. Referring to terrorist attacks in London and Russia (something he HASN’T actually done yet- my Tivo has a delay for live TV, but it’s not THAT bad) he said: Terroirst hope these horrors will break our will, allowing the violent to inherit the Earth.”

9:23- Foxnews.com “We Seek the End of Tyranny,” and goes on to say “President says nation must not falter in War on Terror, should end dependence on Mideast oil through alternative energy.” Hasn’t said that yet.

9:26 – www.nytimes.com – “Bush Messages: Defeat Terror and ‘Keep America Competitive’” Well, the story has time stamped 9:17, but he hasn’t yet said what they say, that “President Bush _said_ tonight that Americans must break a national “addiction” to oil to preserve their country’s prosperity and security. Of course the caption under the what actually looks like real time photo does offer a future tense outlook: “The speech is _not expected_ to offer any bold initiatives for 2006 or present any significant news on Iraq.” Guess the caption writer isn’t “real time,” same liberal bias though!

9:29 – www.washtimes.com – Holy cow! The Washington Times – what a bunch of hacks! The lead story for this conservative paper is…”Coretta Scott King dies at 78.” That was SO this morning’s news, it’s like they stopped to think before they wrote something. Amateurs!

9:32 – www.drudgereport.com – “America is Addicted to oil” – well, we expect Drudge to have the scoop ;-)

9:34 – phew, we’ve gotten to the part where only half the crowd stands and claps for ideas. That would be the Democrats sitting down to the suggestion of re-upping on the Patriot Act. They wonder why they’re perceived as weak. Look at that, Hillary is smiling.

9:36 – news.bbc.co.uk – “Bush Warns US of ‘oil addiction.’” Not surprising, hasn’t said it here yet, but those Brits are five hours ahead, so the speech is over there, right? ;-)

9:38 – abcnews.go.com – wow, something he actually already has said, “President Bush asked Americans to reject the false comfort of isolationism.”

9:40 – www.cbsnews.com – “We Will Never Surrender” – nope, hasn’t said it yet.

9:40 – Bush asks to make his tax cuts permanent, camera quickly pans away from frozen-sitting Democrats.

9:42 – “Pass the line item veto,” Those pesky Supreme Court Judges won’t clap for ANYTHING!

9”42 – bets joke, “two of my dad’s favorite people – Me and President Clinton.” Hillary barely cracks a smile!

9:43 – “Congress did not act last year on my pleas to save social security” – the Democrats go wild, Hillary looks giddy – shameful.

9:46 – www.bloomberg.com – “Bush Seeks Support on Terrorism, Offers Modest Domestic Plans.” Google stamps it as 37 minutes ago, technically before he began speaking (wow, they’re good!)

9:48 EST – “America is Addicted to oil” PHEW! Big line FINALLY happens.

9:49 – Bush proposes all sorts of new spending on alternative energy. Hmmm…where are those nutty environmentalists on this one?

9:53 – Okay, yeah I admit it, this is kind of a boring State of the Union so far.

9:55 – Oops, I realized my time may be off – backed up with Tivo a while back to see Hillary get giddy about bankrupting Social Security.

9:56 – Weird. NBC will only show the left hand side of the gallery. (W’s left).

9:57 – Finally, those judges clap….for Sandra Day O’Connor.

10:02 – NBC pans the camera to John Kerry, millions of Americans heave a sigh of relief to see him…in the audience!

10:03 – It’s over. 51 minutes from start to finish they tell me. Wow, not an exciting speech. Oh well, time for the talking heads to take over the talking (ugh, bores).

Game, Set,....

Finally, the Senate confirmed Samuel Alito to the Supreme court. Look at this SHAMEFUL picture that CNN put on Cnn.com to accompany the announcement of a Justice of the Supreme court being sworn in. It looks like a picture of someone who has been arrested coming out of court. This is a man who has hit the pinnacle of his profession, one that should be revered in this country, and one of our main “journalistic” outlets takes a cheap shot at him with a “frog walk” picture? Unbelievable.

He wasn’t treated much better by the democratic portion of the United States Senate. In a shamefully partisan split vote, Judge Alito was confirmed with a vote of 58 to 42- only 4 democrats voting for confirmation (and one “Republican.”) To put this in context, Clarence Thomas, the man most railroaded and reviled by the left (unless you consider Judge Bork) got 11 democratic votes! Compare that with votes for far left Justices such as Justice Ginsberg, and consider which party is actually working under the auspices of the Untied States Constitution.

So long Maestro...

Fantastic tribute to Alan Greenspan by Milton Friedman in today's WSJ entitled, "He has Set a Standard." It's always so interesting to see 12-cylinder brains just go at it and see what scraps you can catch as they fall off the table. Messrs Friedman and Greenspan though friends have apparently long disagreed about strict rules versus administrator discretion in central banking policy. Mr. Friendman's tribute conceeds, halfway. He points out in full detail Greenspan's success versus the first 70 ineffectual years of the Federal Reserve. He conceeds that Greenspan did an excellent job keeping the money supply consistent and noninflationary while at the same time holding out that not every adminstrator will have Mr. Greenspan's talents. (Incidentally, he points out what many of us know --that it was Ronald Reagan who set the "hands off the Fed" example, first with Paul Volker and then with Alan Greenspan, that all Presidents (thankfully) now follow).

Incidentally, to my "Massachuestts" friends who haven't figured out that the economy is booming and has been for a long time -- Mr. Greenspan used his last day in office to raise the Fed Funds rate (a 1/4 point) for the FOURTEENTH time in a row. That's done because the head economist of the land is fearful of inflation, a sign that the economy is growing too fast (again, fourteen times in a row).

Also, for those who consider the Federal Reserve to be a "black box," two great reads are Bob Woodward's Maestro, as well as Secrets of the Temple.

Many Happy Returns...

I was traveling Friday and unfortunately missed the chance to note a happy anniversary. Friday was the twenty-fifth anniversary of Ronald Reagan as the fortieth President of the United States of America. You could easily make an argument that the most important President of the twentieth century was Franklin Delano Roosevelt, and you’d probably be right. However, I don’t think there is any argument over who was second, and in the category of favorites (at least for me) first, and that is Ronald Reagan.

There was a great op-ed piece in Friday’s Wall Street Journal entitled “Still Morning in America.”:

“Perhaps the greatest tribute to the success of Reaganomics is that, over the course of the past 276 months, the U.S. economy has been in recession for only 15. That is to say, 94% of the time the U.S. economy has been creating jobs (43 million in all) and wealth ($30 trillion). More wealth has been created in the U.S. in the last quarter-century than in the previous 200 years. The policy lessons of this supply-side prosperity need to be constantly relearned, lest we return to the errors that produced the 1970s.”

I was in the Boston Museum of Science this weekend and happened past an exhibit on the ever changing population of the United States. The current population of the United States is estimated at just over 297 million people. People are being born at rate faster than they our dying in the country, but statistics that most interested me dealt with choice. Every 38 seconds someone in the world immigrates to the United States. The statistic for people emigrating, or moving away from the United States, was one every 137 seconds (it may have been 178 or 187 – should have written it down).

What the statistics above tell me is that when a decision is based on choice – where to live, the United States has a net gain of people voting “with their feet” to live here. It would be interesting to compare these numbers with those of other nations, especially those that are often held up as better at this or that than the United States.

Rightly or wrongly, in my heart of hearts I still believe in the United States as the land of opportunity. Not perfect in any way, but definitely the fairest, the most hopeful, and always representative of any honest, hard-working person’s best chance. I love Ronald Reagan not just for his numerous accomplishments (say…saving the entire world from Nuclear Holocaust- gotta love that one!), but because he never stopped believing in America. Ronald Reagan, more than any other President in the twentieth century, did the most to hold up the U.S. as the “shining city on a hill,” and to re-introduce Americans to the goodness that is the United States of America.

A great listen...

Years ago, if you volunteered that you liked “books on tape,” you were liable to provoke a few snickers (maybe that’s just because I hung out with English majors). To fit on the most common format, two cassettes (about three hours of listening) most books required drastic cutting to fit onto this new audio format. Listening to something on tape back then was equated with reading the “Cliff Notes,” instead of doing the work to read something.

However, in college in 1989 and finding myself driving my mother’s Ford Escort with an AM radio only (same Car/AM radio combination that introduced me to Rush by the way) I was lucky enough to stumble upon my first book on tape. I was even luckier when it turned out to be a great story by a great author, “Presumed Innocent” by Scott Turow.

To this day, Scott Turow is one of my “go to” authors for a good novel. His writing just totally sucks you in. Unfortunately, he seems to write way too slow. Don’t quote me, but I feel like he only puts out a book once every three or four years!

I am reminded of all this because I’ve just finished listening to the latest Turow work, Ordinary Heroes, in audio format. The book is a bit of a departure from Turow’s other fiction works in that the main story takes place during World War Two, following Captain David Dubin of the JAG core (Judge Advocate General). Of course, the book still touches on Turow’s ever present fictional Kindel county, by framing the Captain Dubin story with one of his son, a reporter in modern day Kindel.

So between that first book on tape 15-16 years ago and this latest one a lot has changed. Subject to a whole lot of “car time” over the years, I’ve only listened to probably around 200 more books in what would otherwise be “junk” time (okay, I don’t know exactly how many, but it must be in that range). Of course for the past several years it’s been much better. Instead of tapes, you load multiple audio format books onto your iPod. Instead of abridged version, you get the entire book. And thanks to companies like Audible.com, you have access to a much wider assortment of “reading” material.

Yes, I still “read” the real way, but the advantage of these books on tape is that you can absorb that much more. I tend to devote most of my “real” reading to things that I consider work or career related (okay, sometimes loosely). The books I take in on the iPod tend to be the “fun” stuff I might not normally make time to read. Or it may be all those books I wish I had time to read, but can’t seem to find the time.

American Capitalist

After a false start of just a few chapters last year, I’ve recently picked up and finished pouring through Roger Lowenstein’s biography of Warren Buffett, “Buffett – The Making of An American Capitalist.”

This book is a great read, especially for any like-minded business-book junkies like me. Having said that, I’m not sure there is a whole lot I can say about Warren Buffett that a thousand others haven’t beat me to many times over. However, what does occur to me is that I can further clarify a post to this blog I made back in December.

In a post prompted by the "news of the day," and entitled “Predators serve a purpose, (Dec. 11th)” I talked a little bit about my view of corporate raiders serve a purpose by keeping the management public corporations on their toes. Since Warren Buffett has often played the White Knight role, protecting the occasional good management team of a company put in play by raiders, it occurred to me that I should also highlight what I think is a much more important, perhaps even “noble,” component of the free market – the true long term investor.

From the book:

“One time, Buffett said an investor should approach the stock market as if he had a lifetime punch card. Every time he bought a stock he punched a hole. When the card had twenty holes he was done—no more investing for life. Obviously, the investor would filter out every idea but the best.”

Much more than corporate raiders, the long term investor holds up and supports our market system by financing industry. Warren Buffett actually stands out among the world’s super-rich because his fortune was not built solely one main business, but instead on his ability to evaluate many different businesses. The brilliance of Buffett is not just that he is able to assess intrinsic value of a business, but also in his ability to allocate capital by repurposing free cash flow from one business into another.

“ What counted was the profit as a percentage of the capital invested. That was the yardstick by which Buffett would grade Chance’s [the top manager at Berkshire Hathaway’s textile mills] performance.” A Buffett would say, “I’d rather have a $10 million business making 15 percent than a $100 million business making 5 percent,” Buffett said. “I have other places I can put the money.”

Incidentally, my favorite business book ever, that is, the one I think if studied enough could probably replace my entire MBA, was written by Warren Buffett himself! The Essays of Warren Buffett: Lessons for Corporate America,” is actually and edited compilation of Buffett’s writings, primarily from Berkshire Hathaway annual reports.

In combination, the two books are a great course on Warrant Buffett the man, and the philosophies that have made him the second richest man in the world.

Pictures...

I get no credit for this from my friends, but I'm actually a really nostalgic person. Very much from my own personal experience, but I also attach a lot of feeling to famous people I don't know. I came across this picture of Peter Jennings in a "famous people who passed away in 2005" article. It's great.

I'm a "big bad Republican" who loves to rail at media-bias I see on the TV (and it's there every day) and I actually think of Peter Jennings, as part of that media establishment. But, at the same time, I totally love Peter Jennings. Somewhere around the age of ten, I really got "into the news." I credit my father, who always wanted to watch the national news. Somewhere a year or two after that I became one of the one or two kids in class who knew the name of foreign leaders - who knew the location of countries around the world.

I forget exactly what year, but somewhere in my life, Peter Jennings and ABC News became my favorite Network news outlet. I know it was my favorite, because my dad would watch one national news show at 6:30, and then we'd switch channels and watch a second on a different network. Later on in life I became a Tom Brokaw fan, but for a good ten years, Peter was the man. I'm very sorry that he's gone....

"Don't mess with Texas!"

I _love_ this picture. All my "commie" friends...eat your heart out! (Totally cop-ed it from Time "pictures of the year," but no one reads my site anyway...

Real (good) Sports

I have just seen what I think might be the best hour of sports reporting I think I’ve ever seen. I’ve liked Real Sports, with Bryant Gumble in the past, but I’ve never made it a must see television show. Tonight I watched the 2005 “recap/best-of” show and each story was more interesting than the next. Four stories from 2005 that were heart- wrenching/inspiring, astounding (in a bad way), outlandishly funny (and again, astounding), and finally just plane happy.

The first story was from right here in Boston and profiled Rick and Dick Hoyt. I’m not a native New Englander, but I feel as though every year I have been here I’ve seen some mention of the guy who pushes his wheel-chair bound son through the Boston marathon. Rick Hoyt was choked by his own umbilical chord before birth and was born without the ability to move any part of his body save his head. He wasn’t able to communicate with his own mother and father until hooked to a computer when he was twelve, his first words being “Go Bruins.” In 1977 Rick inspired his father to push him through a five mile road race to inspire a man who had recently become a quadriplegic; this despite the fact that his father was no athlete. Now 65 years old, Dick Hoyt has pushed his son through endless marathons and triathlons—either pushing his son in a wheelchair, riding him on a specially handlebarred bike, or pulling him in a raft while swimming. Even so he beats out many athletes despite the added weight.

The second story was maddening, astounding even in 2005. The story profiles the constant presence of outright, unabashed racism of European soccer crowds. Any time a black athlete in one of these games is passed the ball they are berated with a “monkey chant” or bombarded with actual bananas. Not just a few, but ten or fifteen at a time. That’s a lot of people practicing pre-meditated hate. What’s more, this isn’t just one stadium or country practicing this, but multiple throughout the UEFA. Hundreds of fans at once giving a Nazi Seig Heil salute (Spain and Italy, as well as Eastern European states were singled out as the worst, though British white supremacists were also profiled). I’m reminded of the article I wrote about where France disallows Muslim head-dresses ("What did you expect France?"). I know the United States has a racism problem. I know it’s still there, but this…was…astounding. Horrifying even. No excuse really. I’m certainly going to pause the next time one of my liberal friends tells me that we need to worry because “W” has lowered the respect of Europeans around the world. (yes, I know it’s an unfair generalization- but they obviously have their own issues).

The third story was finally funny – in a “this is unbelievable?” kind of way. In Kentucky there is a horse by the name of Storm Cat. A grandson of the famous Secretariat, Storm Cat only made around $500,000 total in winnings as a racer. However, it turns out that the offspring of Storm Cat had a gift for running ($90 million total in winnings so far). As such, Storm Cat gets sold out for stud. Twice a day, seven days a week, 365 days a year Storm Cat…has sex with other mares (that’s 730 a year “for those of you in Rio Linda” minus a few repeats and rejects). The Stud fees for Storm Cat are…hold on to your hats here…$500,000 for each conceived horse. Given that the horses are timed to be in heat, that’s a lot of baby horses, $20 million per year at the current rate. Storm Cat is currently the father of at least 1,200 horses! Probably the funniest, and at the same time unbelievable thing I’ve seen on TV in a long time.

Lastly is the story of Ryan Belflower, a special education student who beat the odds by making the varsity basketball team at his High School. The story is heart-warming, and good, and reminds me of the movie Rudy. In the end Ryan gets to play in “junk time” during games where the team is either winning real well or losing real bad. The story ends happily when Ryan finally makes a shot in his 26th game, and last chance in regular season as a senior. He goes on in a playoff to make two straight three pointers. The best part is the overwhelming support of his community and school, proving that sometimes, people…are just…good.

Great show. (HBO is _SO_ much better than normal TV).

Rich is right

Rich Karlgarrd's latest column is must read. It's entitled "The World's Worst Disease," and unforuntately too man people have it....

“It won’t fail because of me.”

I just finished reading Andrew Chaikin’s book about the Apollo program entitled “A Man on the Moon.” This is a fantastic read, especially for someone my age who “missed out” for the most part on the most exciting piece of America’s space program. Having been born in 1970, I of course missed the first landing on the moon in 1969, and was blissfully ignorant of the five other landings that finished up in 1972. At this age, men having walked on the moon –the moon – has always just been a fact of life. I feel cheated for not having been born at an age where such a fantastic voyage was still just a possibility.

This is a great book for reliving the excitement and wonder of what is surely the greatest exploration missions undertaken by man. The book is a fantastic narrative of who the Apollo astronauts were, how they made it to the moon, and what they did there. But putting the amazing adventure and science aside, what the Apollo program really is is an example of an enormous undertaking done right:

“It was being part of a team that was dedicated to something that transcended individual aspirations. That’s what Apollo was. It was thousands of people who were willing to work day and night…You can’t imagine what that’s like compared to an every day experience. “
- Ken Mattingly, Apollo 16

“The Lesson,” as Chaikin explains of Apollo, “is that we can do difficult things, when the objective is clearly defined, and when enough people and funds are dedicated to accomplishing it.” I am struck by what a huge, wonderful, and unquestionably good thing this was, accomplished on the backs of literally thousands and thousands of people who all said to themselves, “it won’t fail because of me.”

Of course, reading this book every page you’re continually struck with the thought, “why did we stop?” Men have not walked on the moon now for thirty-four years. As one of the astronauts points out in the book, the moon has a surface area one quarter that of the Earth’s. Why should we think we have it figured out because we visited it in six small places? If mankind is to explore space further, it inevitably will re-start with the moon. There is no Mars landing without first revisiting the moon and “setting up shop.”

The real tragedy of the Apollo program is how we just abandoned it and all the knowledge gained with it. You might think that since we did it once that we could, with a little elbow grease and a few greenbacks, accomplish it again. You’d be sadly mistaken. In truth, everyone who made Apollo is gone. The scientists, the engineers are all retired or dead or both. You may think there’s massive blueprints that NASA can just pull out of a drawer and rekindle moon missions when it pleases, but unfortunately it doesn’t work that way. As Ken Mattingly warns, “If you don’t build things, you don’t know how to build things. We can’t handle a ten-year hiatus. There won’t be anybody left.”

It’s both incredibly exciting and at the same time sad that the real action in space at the beginning of 2006 is in private space flight. Burt Rutan and SpaceshipOne have jump-started a private space industry that will eventually be mammoth. Unfortunately the achievement has nothing to do with exploration, but more of applied engineering. Just like any “cheap revolution,” as Rich Karlgarrd calls it, the reduction in price of anything really good will foster it’s increase use. Space tourism will come to the masses eventually because so many “rich” people are willing to finance an as yet un-built private space ship fleet by committing $200,000 of their own money today.

While any space enthusiast has to be excited by the coming onset of a private space industry and its associated price deterioration, there still remains a role for a publicly financed space program. In a word, “exploration.” Thomas Jefferson opened up a whole new world for the United States when he financed Lewis and Clarke’s expedition through the West. You could say that over time adventurers would have found the same routes, but exploration and scientific discovery is sometimes better when done in the name of a people. I think the world would be well served by another Jefferson or Kennedy pushing us to explore further.

What I really wish is that I’d been old enough during the Apollo program to have had that “holy-s***, they did it!” feeling. Now that it’s so far in the past I worry that not enough of us sit around thinking what it’s like on the moon, or even what's next.

“It’s the moon that people want to hear about, and like all his colleagues, when [Pete] Conrad is introduced as one of the twenty-four men who went there, the question he is almost always asked is, What was it like? And he gives the neat, two second answer he developed long ago: “Super! Really enjoyed it!”