Businesses Are Missing a lot of Opportunities

Because of the perceived costs of developing and the perceived difficulties of managing a full-featured web site, many owners and managers at small– and medium-sized firms want only a simple ‘web presence.’

Often that ‘presence’ consists of a single page that announces, “we exist, here is our telephone number,” or it consists of a few pages with not much more information.

Clearly, such sites are very cheap to develop and maintain although perhaps ‘not maintain’ is a more apt description. However, such sites do little or nothing to generate revenue or create long-term value.

In this post, we dispel a few of the myths regarding presumed high costs and explain a few of the benefits of a full-featured site.

Web Sites Shouldn’t Be Yellow Page Ads

There’s a good chance that if your business isn’t web, information, or technology-related, then you are not familiar with the ease-of-use and capabilities of modern, informative, well-managed web sites. In fact, if all you know is  “it’s something with computers,” then you may believe that maintaining a site is much more difficult than it really is—or than it could be with a well-designed site.¹

If the paragraph describes you, then you may think that something that is the equivalent of a Yellow Page advertisement is a sufficient web presence.

It’s not.

If your family is like ours, the Yellow Page book never makes it into the house. It goes straight from the curb or the front porch into the recycling cart.

That’s not very different than how web visitors, who don’t already know you, treat your minimal web presence.

Now, we don’t fault site owners for believing that a single page or a bare bones site is sufficient to generate revenue. They may not know any better.

Out-of-sight, Out-of-mind

In fact, on occasion their prospects and customers may have mentioned, “we found you from your web site.” However, those owners have no idea of ongoing lost profit opportunities because unseen, potential customers can’t find the information they seek (and so, never call).

Those missed opportunities arise because most owners and operators of small– and medium-sized businesses don’t spend their days surfing the web; so, they may not realize that many customers and prospects find web sites to be vital and inexpensive (and in some case, irreplaceable) sources of  information (about products, services, and organizations). So, those owners and managers may be unaware of the lost opportunities to convert web visitors into actual, paying customers.

Fortunately, we think that lack of that awareness can be overcome by asking those individuals a few questions:

1. When you, yourself, are looking for information about a product, service or organization and you find a site that consists of a single static page, how often do you contact the site’s owner?
2. How does your single page differentiate your firm or organization for your competitors, whether they are local, national, international, or on-line?

While it is possible to (psychologically) rationalize a justification to the first question, that’s much more difficult to do with the second. If your single page or uninformative site doesn’t seem to hurt you now, then you better hope that your competitors don’t start leveraging the web to their advantage. (Of course, we would argue that an uninformative site is already hurting sales more than you know.)

Also, note that we could rephrase or re-spell the above subtitle as “Out-of-site, Out-of-mind,” because that’s often what happens when customers leave an unremarkable ‘web presence.’ They forget that you exist.

“We Can’t Afford it.”

Oh really?

When we hear that sentence, we wonder: how can you not? Especially for firms where a single additional sale (generated) from an enhanced presence would pay for the entire site.

For many firms, such myopic perceptions persist far beyond web site and marketing decisions; so, it’s worth emphasizing that cost minimization does not imply profit maximization. In other words, minimizing expenditures doesn’t maximize profits when the marginal amount spent would generate greater marginal benefits. It’s the very definition of being penny-wise and pound foolish.

We understand that for projects like web sites, the marginal costs are incurred immediately, and they are more precisely known than the benefits, which seem to be less certain and amorphous, but still it is 2010, after all, and there are several hundred million PCs in the USA and (we’re guessing) tens of millions of cell phones with web browsing capabilities.

For relatively expensive goods or services a single additional order can recover all upfront design and development costs, and that is true for industrial firms, swimming pool builders, and many other types of products and services.

That’s a single new order over the life of the site that could easily, easily last for five-to-ten years.

Now, we could create a full-fledged, cost-volume-profit analysis and assume certain contribution margins (roughly, revenue — variable costs) and calculate break-even points and probabilities of achieving those points, but if your business needs only one or two additional (i.e., marginal) sales over five-to-ten years then it seems rather obvious. (For lower priced items, the break-even number of marginal orders increases but then the upside potential is much greater, too.)

Moreover, in certain cases, our argument becomes substantially more persuasive:

1. Reputational effects & (what we would call) high serial correlation): If your business or organization serves a market where reputation matters–where a satisfied customer is likely to recommend you to a friend, neighbor, or colleague–then one additional web-generated sale could easily lead to many additional ones. So, given that you provide excellent service, one new customer who found your firm via the web could easily turn into a neighborhood or community of non-web-based customers.
2. Availability of a New Marketing Initiative: many successful and long-standing firms without significant web presences often ignore this opportunity, especially industrial firms. Suppose your organization has a relatively constant customer base, and those customers are well-served by the usual, personal sales techniques. Often sales managers and owners or marketing managers ignore the opportunity to sell to a new market segment, and an inexpensive but effective way to test new markets is via a web-based campaign.

For example, due to recent high energy prices and to governmental regulations, many manufacturers have had to make their products more efficient (consider just about anything that consumes power in an office or factory). Existing customers may or may not be concerned with such advances or changes, but potential new customers that have new sustainability or green initiatives might be. So, a web site, which doesn’t alienate existing customers, but addresses the needs of green and sustainable firms offers a huge opportunity to capture sales and reach (or create) new market segments.

We can imagine a reader protesting that our analysis considers upfront costs but ignores recurring costs. For a normal small or medium-sized businesses, a well-designed, self-managed site can have recurring costs as low as $150 PER YEAR. (With a full-fledged web store that processes transactions on-site–rather than, say, at PayPal–recurring annual cost increases to between $500 — $750.) Yeah, it’s that cheap.

Ancillary & Operating Benefits

A well-designed site offers more than marketing benefits. It can provide better ways to conduct business, and those methods can lead to improved efficiencies and more realistic customer expectations.

With easy-to-create password-protected pages, one can show actual customers more information than generic, web-site visitors. So, customers can receive answers to frequently-ask questions or have access to reference materials without interrupting your day or one of your employees. (Or, without requiring you to answer the same question for the 1,400th time.)

For long-term projects, a site that explains the process–the number of steps, the time-frame, and the usual reasons for delay–creates more realistic customer expectations and permits them to find answers to their questions. We think that it is often lost on small-business owners that during, day, a construction process, customers have almost as much aversion to making calls as you do to answering them. So, why not try to eliminate those calls by providing an alternative source of information.

Forms: a site with well-designed contact forms permits you to know something about your prospects before the first telephone call, including: who they are, where they are from, what they seek, and which pages they have visited. Such forms can be very short, like our contact page or a simple request for information or they can be long and multi-paged, like a sports registration form. Regardless of their size and scope, there is only one answer to the (leading) question: isn’t it better to know something about prospects before making that call?

Upon submission, good form software forwards web visitors to relevant web pages, and it also permits customized, automatic e-mail replies. Almost all form software will send an e-mail to someone within the firm whenever there is a new submission, and that recipient can depend upon the data that were collected. (By the way, many of the form generators that we use are free. The most expensive one is $125.)

Calendars: for businesses that require appointments, why waste your’s staff time scheduling sessions when many customers are willing to make their own reservations on-line. (So, let’s get this straight: you can buy an airline ticket or a hotel reservation on-line, but you can’t make a hair-cut appointment without calling someone?)

With full-featured calendars, it is quite easy to show availability and permit web visitors to make requests. That’s a convenience for your customers who desire it, and it let’s staff members focus on value-added services. For other types of firms, shared resources can be more efficiently used with private versions of the same calendars. In fact, one calendar installation can provide both types of schedules: public or private, password-protected or not.

On-line Transactions: modern web stores are secure, rather inexpensive, and very easy to maintain; so, it is surprisingly simple to sell goods and service on the web; however, your organization does not need a store to provide and benefit from on-line transactions. With PayPal, it is quite easy to send e-mail invoices and permit customers to pay on-line. As we frequently say, 97% of something is better than 100% of nothing.

Caveat Emptor

Of course, not all web sites are created equal. So, when choosing a site designer or builder or developer, be sure that you are getting the ease-of-maintenance of a well-designed content management system. Otherwise, you’ll get a web presence, which may or may be inexpensive to maintain, but you will not get an effective, adapatable business management tool. To see what it available, visit our web design center at Design.SperoConsulting.com.

As always with our longer posts, we’ll likely update and edit this during the next few days.

Related posts:

• Press Release: PD Innovation Web Site Completed
• Wow! What Insights!
• Giving Your Firm a Global Web Presence
• Web Design and MIS
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As Dreaded E-mail Attachments

Each week the elementary school sends at least one e-mail with a variety of PDF files attached. Those files remind us of nothing more than electronic barnacles that create friction on the internet and waste space on hard drives. (It’s not the only violator, just the most recent.)

Usually those separate files–which must be saved and opened, or at least opened–are simple announcements from the school or from one of the parents’ associations. There is no compelling reason why those simple, text announcements could be easily incorporated into the e-mail message. That action would save each of the 300-or-so families at the school a decent amount of time every week.

Now, such a change might seem trivial–if you are not the one opening the PDFs. In addition, such a change might be inefficient if it overly-burdened the sender, but eliminating most or all of the PDFs requires nothing more that one person opening the file and copying-and-pasting the text into the message. In this case, the process is so easy that for each attached file, the cost:benefit ratio is about 1:300, and that is a nice efficiency gain.

Actually, that minor cost could be completely eliminated if the e-mail sender requested that the announcement be sent to them as e-mail messages, rather than as PDFs.

Of course, if such files are more than informational, if they are electronic versions of paper forms, then it may be inconvenient to incorporate those forms into the message’s body. BUT, if those forms are routine, then rather than having each recipient open, print, and fill-in the paper form, the sender could direct the reader to an on-line form to complete.

In this case, forcing 300 families to print a page isn’t particularly green, cheap or convenient. It is not green because it wastes paper and ink. It is not cheap because it wastes paper and ink. It is not convenient because it requires printing, walking to the printer, retrieving the form, completing it, and, in this case, ensuring that the child returns it to the school. (In other cases, a stamp and envelope are required.)

On a well-designed web-site, such forms can be easily replaced with their electronic equivalents: simple; easy-to-use; click, click, click, and you’re done. They surprisingly affordable to generate and edit.

When we have mentioned similar phenomenon to other organizations and clients, we usually get a response, like, “you don’t understand, we have 30 different forms.”

Not-so-close inspection usually reveals thirty sheets of paper in different fonts and lay-outs collecting about 95% of the same information. Often, all of those forms can be compressed into one or two on-line versions with different drop-down subjects, etc. Of course, like just about any other computer file, once an on-line form is created, it can be copied and edited to create a similar, derivative form.

At one organization we were able to nearly eliminate the need to print paper versions of registration forms. Besides improving the customer experience, that change has substantially improved the efficiency of collecting and aggregating data. No need to retype the data into an Excel spreadsheet when it can be downloaded from an on-line database or can be automatically sent (via email) to relevant parties.

By the way, in December we wrote about the problems with using e-mail as the firm’s or organization’s central information system. You can read about it here: Inexpensive but Valuable Web-base MIS.

On Web Sites

There are times when only the PDF version of a file will do. However, being forced to click a link on a web site to read text through a PDF viewer or browser add-in or to download a form is very inefficient for web site visitors and neither effective nor efficient for the site’s owner.

It’s cheap, it looks that way, and, most importantly, it turns away visitors. That’s because many visitors won’t download or open such files so, they never see what you have to say. Moreover, for those performing web searches, many potential visitors don’t become actual visitors because as soon as they see “PDF” in the search result, they start scanning downward for the next result.

Except for certain special materials, like, say, material that you are only allowed to disseminate as a PDF file–e.g., some academic journal articles or legal documents–anything that can be communicated within a PDF file can also be communicated in a web page, and no knowledge of html or any other computer language is required.

If you can do it in MS Word, you can do it with a good content management system. Not only are you likely to get more hits from within search results, but you are also likely to have an increased potential for hits because it is much easier to search-engine-optimize content on web pages rather than in PDFs.

Of course, if PDF file content is converted into web page content, there is no rule that prohibits posting the PDF file, too. (In addition, there are a number of free web plugins that allow visitors to convert web pages into PDF files–if you like that kind of thing.)

While some (obstinate) readers, may not consider this to be the most pressing of causes, it is one that is simple to implement and beneficial to all parties involved.

If you would like examples or demonstrations of on-line forms, please download this PDF form, complete it, and mail it to us. Just kidding, please contact us, instead.

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Raspberry Photo is a portrait photography firm located near Pittsburgh that specializes in  photographs of children and families. It is owned and operated by Bonnie DeMatteo.

Bonnie wanted her new site to:

1. Showcase many beautiful portraits in her growing portfolio;
2. Allow clients to view, compare, and purchase portraits;
3. Be easy to self-manage; and
4. Be search-engine optimized.

We were able to meet her requests while seamlessly integrating the appearance across the site’s different purposes and functions.

The main site provides the ease-of-use, search-engine optimization, and dashboard information of a well-buit content management system.

The slide shows that appear (on the home page and under the galleries links) are easy to manage and can be created from within Adobe Lightroom, a popular batch-image processing program among photographers, or they can be created and edited from within the content management system. They’re very cool and surprisingly simple to manage.

The client proofing area is a full-featured, Flash-based store that can be easily self-managed and adapted for other types of products and services. For a business like Raspberry Photo, the actual products are private photographs that appear in password-protected galleries, but is a simple setting, and depending upon your business, all products could be made public and available for sale to anyone on the web.

To keep costs low, the proofing shopping cart directs clients to PayPal to complete their transactions. It is seamless and automatic and clients don’t need a PayPal account: credit or debit cards work just fine. (To host actual transactions costs about $500/year, and in this case, offers no real benefit.)

Visit and let us know what you think. Visit our design center for more information on our web-related services.

We think that the new site is worthy of her portraits, and we’re glad that she does, too.

Related posts:

• Press Release: ArcofWPA Site Goes Live!
• Press Release: PD Innovation Web Site Completed
• Press Release: Insight Rising Web Site Completed
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• Web Design and MIS

Previously, to protect proprietary information, we had password-protected much of it. Now, it’s available for the world to see.

Credentials are still needed to explore the back office; so, contact us if you would like to see how easy it is to manage your own site.

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• Consulting

A few weeks ago there was an article in The Wall Street Journal, What’s a Degree Really Worth. In it the reporter Mary Pilon discussed the estimated difference in the average lifetime earnings between individuals with and without the college diplomas, and she mentioned a few problems–but only a few of the problems–with some of those calculations.

We don’t have much to say about those bad calculations other than the estimation methods aren’t very sophisticated. The one method involved multiplying some overall difference in average annual earnings by 40 years–the presumed length of one’s work career. Among other things, that simple product doesn’t include opportunity costs–e.g., wages lost while not working during time in college–or differences in growth rates of compensation through time or time-value-of-money considerations.

So, while we don’t have much to say about the central idea in the article, we do have (1) a comment about tuition inflation and (2) a related critique about college as white-collar, vo-tech training (and the implications of that).

1. All things equal, government subsidies to consumers increase prices–in this case tuition–which can then spiral upwards.
2. All things equal, higher tuition costs induce students to become more professionally-oriented, and that has several implications, including a de-emphasis of the liberal arts, and that permits anti-social and silly behavior and theories to persist in what has become the figurative backwater of the academy.

(1) Government Subsidies & Tuition Increases

In the article, Ms. Pilon briefly mentioned that average, annual, undergraduate tuition and fees at private colleges increased from $15,518 to $26,273 during the past ten years.

That 70% increase is twice as great as the change in consumer prices– of about 35%–and that’s nothing new. This table at http://www.finaid.org/savings/tuition-inflation.phtml shows that tuition inflation has been greater than general inflation for at least the past 50 years.

Hmm, now what other industry has shown percentage price increases greater than the rate of inflation for a long period of time? You know, that industry that comprises about 16% of GDP? Could it be health-care? Why, yes, it could–although to be precise, health-care inflation has been substantially less than tuition inflation.

So, is it a mere coincidence that two of the industries that have historically been the most-subsidized in the U.S.A. are also two industries with very large and sustained price increases over a long period of time? We don’t think so.

Here is an example of how subsidies increase prices.

We recently had a conversation with the parent of a high school senior. He told us that he had budgeted a certain amount for his child’s tuition next year; let’s say it was $7,500.

Any tuition cost above that amount would have to be funded with grants, loans, work-study programs, and scholarships.

By the way, the reader should think of scholarships from colleges as nothing more than discounts from list prices. Often, they are awarded based upon merit and are called academic scholarships, but that’s not always the case. Colleges have much more pricing flexibility than most parents know, and for whatever arbitrary reason, college recruiters can consider some students more desirable than others and offer those prospects price concessions.¹

Anyway, consider someone like our acquaintance who has $7,500 per year to spend on college. To keep it simple, assume no other sources of funds–no subsidized loans–except a possible federal grant of, say, $2,500.

Without the grant, the maximum that any college could get from the family is $7,500 per year. With the grant, the maximum is $10,000.

Without the Grant

Let’s consider our acquaintance as an average parent. If on average, families have up to $7,500 to pay for college expenses, then on average, colleges have to find ways to operate (as going concerns) with $7,500 per student. Actually, due to their ability to price discriminate, college would charge more and then have to offer scholarships to more students. That’s because stated tuition rates are nothing more than list prices, and one would expect the list price to be greater than $7,500. In that way, the colleges can find ways to charge higher prices to wealthier families with above-average budgets and offer discounts–err, we mean scholarships–to everyone else.

Regardless, colleges wouldn’t be able to get more than $7,500 from our average parent.

With the Grant

Now, it’s quite possible that an average parent could say to his college-bound child, “we had $7,500 to spend for college but luckily you have a grant for $2,500; so, we’ll only spend $5,000 of our own money, and your tuition budget remains the same: $7,500.” It’s possible, but it seems unlikely. Unless tuition is less than $10,000, we’d expect that families who commit $7,500 would be willing to spend that amount under many circumstances.

So, if the family spends anything above $5,000, then the college gets more than without grants. If parents commit their entire $7,500, then the college gets $10,000. That increases the incentive for the college to raise tuition to extract the entire amount available from the family. So, it seems reasonable to conclude that the tuition rates would be higher than they would be without subsidies. Clearly, the college would still try to get as much as possible from wealthier families (and from everyone else, too).

In those instances, where the family commits the entire $7,500, it is no better off, but the college certainly is.

However, it’s worse than that when the government “attempts to help make college affordable” over time. Imagine the first year after the government begins offering grants, if our thinking is correct, then one would expect colleges to increase tuitions. That means that the difference between tuition rates and parental budgets–say, a constant $7,500–would grow. If that difference causes Congress and the President to offer larger grants, then we have the beginning of an inflation spiral. The families that continue to spend $7, 500 are no better off than without subsidies. The families that spend less benefit somewhat, but we’d expect that they would be in the minority. The colleges are definitely better-off (and fatter) and tax-payers are strictly worse-off (as usual).

From each family’s perspective, given that grant programs exist, then receiving a grant is obviously beneficial because it provides more flexibility and capacity to meet high tuition payments. However, collectively, if everyone–or enough students–receive grants, than no one is better-off because tuition demanded by the college is higher only because those grants are available, and the colleges get fatter.

(2) Speculation on High Tuition Costs, Career Training & their Unintended Implications

Or, Does Outrageously High Tuition Doom the Liberal Arts to a Ghetto of Anti-social Silliness?

Note up-front that like much of what we write this critique is rather speculative and requires several assumptions. Admittedly, we ignoring many important general economic and demographic factors, and we make several, very gross generalizations, but (obviously) we think our analysis is compelling nonetheless.

Note also that:

• From this site, one can see that government-provided financial aid began in the 1940s for veterans and was revised in the 1950s. It then expanded to segments of the general population in the 1960s and ‘70s and expanded beyond grants to include subsidized and guaranteed loans.
• From the link near the top of this post, the reader can notice that tuition inflation has outpaced general inflation for at least fifty years.

As we explained above, we think that the second point is an implication of the first. So, we’ll assume that such subsidies increase the cost of higher education. (It would be truly remarkable, would it not, if subsidies to families reduced tuition rates and made colleges more efficient than they otherwise would be–whether that subsidy is via a grant or a cheap, guaranteed loan. In many ways, the long-term phenomenon is no different than the early 21st century housing price bubble created by Fannie Mae and Freddie Mac’s loose and subsidized credit standards.)

So, what could be the unintended consequences of very high tuition costs? We have two in mind, though the second one depends upon the first one.

College as White-Collar, Vo-tech Training

We think that it is possible to argue that higher college costs, along with the associated large sacrifices and borrowings by households and students, have induced many of them to take myopic, careerist approaches to higher education, e.g., “we’re spending a lot of money and borrowing a lot of money, so you better get a good job when you’re done.”

If that perspective is rampant and consumers of education over-emphasize career training, then college is not a place–or is less-of-a-place–where one can gain general knowledge and the ability to think clearly about a variety of problems and possibly–just possibly–a bit of wisdom. In fact, if that is the case, then college becomes little more than white-collar, vocational training that requires a few other required courses and electives.²

That’s not a new complaint and perhaps we’re just projecting our own youthful motivations and experiences as an undergrad and MBA student–so we imagine that everyone is as money-hungry as we were–but there does seem to be a terrible emphasis on how “useful” a course will be, where “useful” is usually defined as something related to some task that one hopes to perform for some prospective employer.

Unfortunately, (1) the uneducated–i.e., students–by the nature of their ignorance are usually not in good positions to determine what’s useful or not (or what should be taught or not), and (2) “relevant” or “practical” white-collar vocational training often reverts to a kind of monkey-see, monkey-do mimicry.

Such thoughtless mimicry isn’t necessarily optimal for students, their prospective employers, or society. For example, consider the very bad financial modeling that helped cause the worldwide financial crisis in 2008. Many colleges taught–and continue to teach–techniques and algorithms that were in use, but weren’t/aren’t particularly useful (or appropriate). So, rather than emphasize strengths and weaknesses of different techniques and abstractions, the emphasis was on teaching techniques because that’s what students and employers wanted–but not necessarily what society needed (or needs): yet another form of myopia.

So, readers sympathetic to our position may readily accept our supposition. For those unpersuaded we have a question: of every former, current, and prospective college student (and their family) that you know, how many have mentioned a reason other than salaries or careers as their reason to attending college? Be honest and consider the percentages.

Note that all things equal, given the fixed number of credits that need to be earned to graduate, an over-emphasis on supposedly “practical” career training almost always means an under-emphasis on other courses that could increase general knowledge and help develop thinking skills as well as (perhaps) help students acquire a bit of wisdom.³

And what are the costs of that careerist, vo-tech approach to college study? Many are well-known and frequently-made complaints about MBAs and engineers and other professionals: short-sighted, lack the ability to learn and adapt and synthesize, etc., but we don’t want to focus our attention on students who become employees. Instead, let’s consider what that careerist perspective does within colleges and universities.

First, we’ve already mentioned–or at least insinuated–it “dumbs-down” studies within particular fields, particularly in professional schools and for professional degrees where the focus is often on what’s done (or what’s to be done) rather than what is known (and unknown) about the world or a phenomenon.

The Irrelevancy of Liberal Arts

Second, the enhanced interest in supposed practical, job-oriented training has led to an under-emphasis on non-professional courses and areas of study. (You know, those required courses that enterprising students view as the collegiate chaff of the professional , vo-tech wheat that they seek.)

To us, that lack of interest and the view that such coursework is a “necessary evil” of getting a degree (and a job) means that (many) students take those courses less seriously and view participation as a cost minimization problem to solve, rather than as a value maximization problem. In others words, they presume such courses are worthless and attempt to find the easiest ways to satisfy requirements and other constraints (while attempting to maintain a high GPA, because, you know, “that’s what employers like to see”).

That has a number of implications, including a desire by professors to pander to students via the offering of silly and worthless courses, which, of course, turns the students’ initial perceptions into self-fulfilling prophecies and permits the such profs to (correctly) view most students as short-sighted, money-grubbers with no intellectual curiosity.

But those opposing negative opinions are not the only consequences of the bad equilibrium. Worse is that such indifference (by students and others, including employers) permits radicalized and poorly-trained faculty to flourish and hire others with similar tastes and predilections. They’re not challenged within the academy, because, frankly, other than a few critics on the right, nobody cares. (Did you hear JP Morgan is on campus today?) That’s true of administrations that emphasize careers, student amenities, and NCAA Division I sports teams.

In our mind, that’s why so much thoughtless, knee-jerk radicalism has thrived within (that portion) of academia since World War II.

Such radicalism and silly inquiries and teachings are come at quite a cost to society; however, we think that their effects are overstated, and, again, that’s because the vast majority of students are too busy seeking career training and summer internships. (Did you hear GE is on campus today?)

And, that’s the true tragedy. The high cost of college–partially to due government involvement–induces students to obsess about career factors, so they don’t get the education that they deserve. Well, they don’t get the education they could have received in a different realization of the world, and that education would include, well, an education, including extensive exposure to the classical, liberal arts.

P.S. Like many of our longer posts, we’ll likely edit the errors and typos and possibly expand our analysis as we think more about the issues.

Footnotes:

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The new Nationwide commercial that has run ad nauseum during the first weekend of the Olympics is the winner.

By the way, according to a few other commercials, the old guy, who seems to be the boss, has both P.A.D. (peripheral artery disease) and erectile dysfunction.

What the hell does the psycho in the woods with the ax say at the end of the ad: “a blue phone,” “a blue bone,” “a blue Ford?” Both stupid and unintelligible: what a coup.

*Well, it’s in a tie with the new 2010 census commercials. Your tax dollars at “work.”

Update: yes, dear reader, you and many, many other folks agree with us. If there is a difference, it’s because we chose “dumbest” but many of you used the word “stupid” in your web searches. What were they thinking? Oh that’s right, they weren’t. Moreover, it seems that no one at the firm is monitoring web searches to see how their asinine commercial is being received by the viewing audience.

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It seems like a worthy cause, but we’re not sure what she can do from the White House. If she isn’t home with the over-weight kids, nagging them to go outside and play or practice their sports or walk the dog(s) or ride their bikes or not to eat too much junk food or not drink too much soda, then we doubt that her campaign will be very successful. (Yeah, being a scold, we think nagging and oversight are crucial.)

Look at the table of state-by-state obesity rates that accompanied the above-referenced article. There are a couple of patterns worth mentioning.

First, notice the historical trend across the table. In thirteen years the national obesity rate–the percentage of individuals with” too much” mass for their respective heights has increased about 60%. That’s a huge increase in the number of people who are huge: an increase of about 30 million people in a little more than a decade. (The table notes that about two-thirds of the population is overweight, and a trip to just about any shopping mall provides all-too ample empirical evidence of that fact.)

Second, sort the above-mentioned table by any year, say, 2008, and compare that column to this per-capita income by state table from Wikipedia. (That one is sortable by columns, too.) Notice that the most obese states–the ones with the highest percentage of obese citizens–tend to have the lowest per-capita income, and vice versa. We haven’t run any statistical tests, but our casual observation, alone, seems sufficient to notice a rather strong inverse relationship between per-capita income and the obesity rate.

We wrote about something similar last September in No Fat Kids, which could have been more descriptively entitled, The Absence of Fat Kids, and in that respect, there are a couple of facts worth mentioning.

There’s no obvious reason why poorer children should be fatter than wealthier children. In the history of the world, we’d argue that is a very, very recent phenomenon. It is evidence of a very, very finely-meshed social service net that provides almost everyone with (at least) what they need, but it goes beyond that.

We hypothesize that, all things equal, the relationship between income and body mass index is an artifact of something else, and among other things that something else involves parental supervision and time, especially in single-parent families–particularly families headed by single mothers.

Families headed by single mothers tend to have substantially less income than families with two parents. So, we wonder whether the likelihood of childhood obesity is related to the parental status of the household. In other words, single parents imply lower income and single parents imply more childhood obesity; so, at least for those children in single-parent households, lower income means more obesity.

Now, we are not saying that single parents are bad parents. Not at all. Instead, we are saying that keeping kids thin may be a task that’s too difficult for one parent to manage. We are saying that being a good, nagging, attentive, available parent takes a lot of time, energy, and discipline. Without sufficient support from a spouse or other family members or friends, trying to keep children active and healthy, is very difficult.

Look at the types of nagging we mention in the second paragraph, consider the amount of energy required, and realize the amount of time required to transport kids to physical activities (and to attend those activities.) Of course, we’re ignoring a host of hereditary or genetic factors, e.g., slow metabolisms, etc., but is there a more parsimonious explanation than it seems to require at least two adults to monitor diets and get the kids away from televisions, computers, cell phones, PS2s, Xboxes, etc.?

Finally, and we mentioned this above, is it not truly remarkable that obesity is more prevalent among the poor than among the middle-class or the wealthy in the United States? (So much for Obama’s “fat cat bankers.”)

Regardless of how much or how little, you, dear reader, know about world history, consider that fact. Can you name any other era or place in history when or where that has occurred? Where the poor have been heavier than the wealthy? It’s not just the near-elimination of starvation and hunger in the U.S., but an over-abundance, an excess, of calories that permits many of the poor to be obese (to the point where their health suffers). Think of the equality of power–through the Rule of Law–and the advanced technology in agriculture, transportation, storage, refrigerator, hygiene, food safety, etc. and consider the innate generosity of the citizenship that permits such consumption–to the point of dysfunctionality. That’s one of the reasons we consider the following question to be nothing more than a rhetorical one: despite all the troubles and problems and conflicts, has there ever been a better time (for so many people) to be alive, especially the poor?

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We had planned to criticize the ads earlier in the week (after the Super Bowl) but never got around to it.

Our sloth, however, was rewarded, and our effort and time were saved because we found this article by S. E. Cupp at the New York Daily News: Wipe Danica Patrick’s sleaze off NASCAR’s track: GoDaddy commercials are insult to fans. (Actually, we didn’t find it, but we heard about it on Redeye, where Ms. Cupp is a frequent guest.)

Except for the part about liking NASCAR, Ms. Cupp writes much of what we would have written, and that leaves us with only a few short comments and question. Ms. Patrick is obviously a beautiful woman and seems to make a lot of money off of her appearance.

However we don’t follow any kind of racing; so, we must ask: does she win or is Danica Patrick the Anna Kournikova of racing?

We’re reading a new book about the financial crisis that is very thought-provoking. We’ll write more about the book in the coming days and weeks, but while reading it, a rather depressing thought kept popping into our head.

If after Scott Brown’s election victory–and as some pundits predict–the Obama administration plans to veer towards more populist positions and actions, we wouldn’t be surprised to see more indictments of investors and traders who were responsible for large losses at both large banks and at hedge funds during the financial crisis.

The President and his staff already demonize Wall Street, and while some of the rhetoric is justified as it pertains to moral and ethical failings, criminalizing poor judgment and greed and honest error is an entirely different issue. (We wrote about that before, but can’t find the link today.)

Nonetheless, we could imagine such trials as showy diversions away from the administration’s problems with health care, terrorist trials, budget deficits, joblessness, etc. (Other than getting out-of-the-way, we don’t think the administration can do much about joblessness, the problem is that they think they can and when they can’t, they may try to divert further attention away from their self-perceived failings onto others, including “greedy fat cats.”)

Moreover, at firms that survived the crisis we could see cynical managements–in particular, cynical new managements–act with the government against individuals, primarily former traders and structurers, and possibly risk managers, as ways to (1) personalize (rather than institutionalize) the losses, and (2) separate themselves from the old guard, i.e., attempt put the behavior of the past behind them.

Indeed, we see it is as a threat especially if the administration can’t pass new legislation and proposed financial regulations through Congress.

Perhaps we are overly-influenced from watching Dr. Zhivago the other night, but as we said, it’s a rather depressing thought.

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Update: after publishing this post very late Sunday (or very early) Monday, we noticed the column, Toward a Different Fiscal Future, by Glen Hubbard. His essay is sub-titled, tax increases can’t plausibly address the coming entitlement crisis, and that fits very nicely with our proposed mitigation.

We admit that the title is a bit overstated, because we don’t know if any single and feasible idea can solve the bankruptcy problem; so, we’ll look to mitigate it a bit with a few long-term recommendations.

We’ve heard for years that Social Security and Medicare will go bankrupt within the next several decades. To the best of our memory–i.e., without searching the web–we recall reading that without further changes in laws, Social Security will become insolvent sometime between 2020 and 2040, or maybe it was a few years later.

Let’s take those projections as given because the exact year is far enough away that it doesn’t affect our proposed mitigation.

So, we ask: besides raising payroll taxes, which are already outrageously high, what other solutions exist?

Well, benefits could be cut, but any bill proposing such cuts would be unlikely to pass Congress.

That means that getting the greatest number of citizens working (and not collecting benefits) is the best way to stave-off bankruptcy. You may have already heard how when the program began in the 1930’s there were more than ten workers for every recipient and now that ratio has drastically shrunk (to something like four:one or three:one today).

Already, the age to collect full benefits has been pushed back from age 65 to 67 for those of us born after 1960. (Actually, it’s a graduated scale that you can see here.) All else equal, that forces older folks to continue working (and paying taxes) while delaying receipt of their checks.

We suspect that laws will be passed to further delay full-retirement age–for us and for those born after us. (We can’t imagine retiring anyway; so, those changes won’t affect us.) However, unless the full-retirement age is increased to 80-or-so (a completely wild-a** guess on our part) that extension alone won’t eliminate the problem.

So then the question becomes: once full-retirement age is maximized at an age greater than 67, say, at age 70, what other solutions exist?

Some folks call for more immigration as a way to increase the ratio of workers-to-recipients, but there are other ways to increase the size of the workforce without permitting an influx of newcomers. (By the way, our solution to illegal immigration–well, actually to what to do with  illegal immigrants–would help with the social security problem, too.)

Now, the government could implement pro-family policies that, at the margin, would induce parents to have more children. (That can’t hurt, and we see no reason to wait until the USA is facing negative population growth–like Japan and certain countries in Europe now face–before implementing such policies.)

Without any calculating anything, we doubt that pro-baby policies would be sufficient to grow the nation out of the Social Security problem. (However, we do have a quick question: if the estimated 30 million or so aborted babies had been born since the early 1970’s, how many more workers would be available to support those currently receiving benefits and how much further-off could insolvency be put?)

So, what else can our society do?

If the supply of potential workers is fixed (or already maximized) and it’s not feasible to get them to work to an older age, then the only option left is to get them to…start working earlier.

We don’t mean permitting child labor as some other nations do. We do mean: (1) motivating parents to have their child(ren) start kindergarten at a younger age so that they can graduate from high school a year earlier. That would move the average starting age back closer to five than six, and means that many students would graduate an entire year earlier than they otherwise would have. That policy can be easily implemented by changing state laws, which can be “influenced” by federal laws and grants.

We also mean providing incentives to induce those in college (and graduate school) to begin their careers–or at least begin working full-time–at a younger age. There are several ways to do that. We’ll mention a few and probably add more through time.

One way would be to limit undergraduate loans and grants from the government to four consecutive years beginning the year of high school graduation (with similar types of restrictions for graduate schools).

Another would be to (a) induce more students to attend college part-time, especially for graduate school, and (b) simultaneously induce graduate schools to offer more degrees on a part-time basis. One way to do that would be to make tuition benefits for college and grad-school completely tax-free when paid by employers or completely tax-deductible when paid by workers (with earned income).

A third way to reduce the average time spent in college would be to provide more rigorous elementary and secondary educations so that students are better-prepared for college, and one way the federal government can (indirectly) do that is to make federal grants and loans for college–like academic scholarships–conditional upon test scores and/or grades.

A fourth way would be to provide a tax credit (or a permanent reduction in payroll tax rates) for citizens who enter the full-time workforce at a younger age.

The general idea is to get twenty-somethings in college to graduate and mature earlier than they do now so that they seek gainful employment at an earlier age and, therefore, begin paying taxes sooner. We don’t see how that is harmful to anyone. In fact, having them grow-up sooner seems beneficial to everyone.

P.S. Like many other topics that we write about for the first time, we’ll likely revise this post as we think more about it.

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Instead, we did what we often do when working on a project late into the night; we turned on Redeye on Fox News.

If you haven’t heard of it, it’s on at 3:00 AM Monday — Friday (actually Tuesday through Saturday) and hosted by blogger Greg Gutfeld, of TheDailyGut.com.

It is by far the funniest show on television: topical, irreverent, acerbic, teasing, and sometimes mean-spirited.

Besides Greg, there are two other regulars, panelist, Bill Schulz, and ombudsman, Andy Levy.

Each night, at least two other panelists-guests appear, and most of those guests are regulars–appearing every week or every couple of weeks. A few of those guests are Fox News anchors and reporters and a few are comedians and a few are from other professions, e.g. a priest, a coroner, a Congressman, etc.

We’d describe the show analogously in two different ways. Neither which may make sense to others, but then it’s our little-read blog; so, we don’t care.

First, if televisions shows were like people, it’s what the early, adolescent Saturday Night Live would grown into had it matured and stayed funny. Note that we use the word ‘matured’ very precisely. We mean had the show’s format matured from skit-based to news panelly, and had it’s world-viewed matured, from something for teens and twenty-somethings to something for forty-somethings who have been mugged a bit by reality.

We certainly don’t mean mature with respect to the behavior or demeanor of the hosts and many of their guests. That generally remains adolescent and juvenile but in a good way, and that’s the second way we think about it. If you, dear reader, hung-out with smart, witty, funny, and occasionally mean kids in high school–you know, before those kids became self-conscious or serious or moody or thought that others cared about what they thought–then you may like it for the same reason. It’s what hanging out with those kids would be like if those kids grew up, became educated, learned a bit about the world, and (generally) had something worth saying, but didn’t lose their sense-of-humor or rudeness.

So, if you hated those kids in high school, you’ll hate the show; however, if you were one of those kids in high school, you’ll likely love the show. If you wondered where some of those kids went, well it seems that few are on television at 3:00 AM and haven’t changed very much. If your schedule isn’t as flexible as ours, you probably won’t want to stay awake for it, but it is definitely worth recording and then watching the next night when the supposed comedians are on television.

Check out various segments on the show’s web site. The robots are consistently hilarious, and the priest, Father Morris, gives amazing answers to very difficult and pernicious theological questions. Lately, those questions have been posed by the robots. (Don’t ask.)

Today is the show’s third anniversary, so to Greg, Bill and Andy, congratulations on your success and on your new table and keep up the good work.

P.S. The Daily Gut web site really sucks. We could do much better.

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We usually work late into the night, but rarely shovel snow at 3:00 AM.

This morning is an exception.

The snow has been accumulating for the past eleven hours, and we’re not sure of the official measurement–we’d guess at least a foot so far–but when we threw our Basenji bitch into the night, she splayed her legs and her paws didn’t hit the ground. (Don’t worry, other dog lovers, we quickly retrieved her and found our boots and coat and began shoveling. Also, being Western Pennsylvania, nothing is flat, and there is immediately two steps down so the depth was difficult to estimate.)

Our other Boots, Our Poster Boy for the Credit Crisis, didn’t make it outside the first time. When we opened the door, they both stood there staring at the vast, cold whiteness, and when we grabbed her, he made a run for it–in the opposite direction.

They (and we) hadn’t been outside since the snow began to accumulate, and we figured that there would be about six inches on the ground–not easy for a Basenji, but not worth shoveling until the morning.

Boy, were we wrong!

So, while everyone slept, we shoveled the walkway from their exit door to their entrance door and a bit of the patio. With drifting, it is already 18 — 24 inches in places, and according to the weather radar there is no let up in sight.

Fortunately, we live on the top of a hill and even when the temperature is in the high twenties, the snow is light and fluffy–well, as light as two feet of show can be. (For some reason, a few hundred feet of elevation makes a HUGE difference in the consistency of it.)

If you live near the East Coast, good luck and be careful on Saturday.

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In fact, students of historical linguistics could tell you that many other words are homographs, too, and those students could also explain semantic change, including the pejoration and reclamation of words. (Don’t be a fool, you know where this is heading.)

We doubt that we have much in common with President Obama’s Chief of Staff, Rahm Emanuel, but we do sympathize with him for the grief he is taking for using ‘retarded’ as a pejorative.

Was it poor judgment? Sure. Should he have known better? Of course. Are we italicizing homographs? You know it. (Actually, because we are lazy and didn’t major in linguistics, only the homographs that are easy to identify and only the first time, but we’ll stop now.)

So, while politically we tend to agree with his critics like Sarah Palin, in this case we think that she and all the other cynical or pious grievance-mongers should grow-up, shut-up and go away.

If you are aggrieved by something that a stranger said about someone else in a place where you weren’t approximately six months ago, then you, dear reader, are either a cynical, politically-motivated d.b. or you are a humorless scold–possibly a bit too sensitive and possibly with deep emotional problems.

In fact, it would do everyone–individually and collectively–much good to remember that on occasion, everyone behaves like a butthead, but there is a huge difference between malicious behavior and simply making a mistake in the heat of the moment.

In our mind, that difference is nearly analogous to Saint Francis de Sales’ distinction between sin and imperfection; however, in this case we have a different ‘Francis’ quote in mind. That would be one spoken by Sargeant Hulka in the 1981 movie, Stripes. When one of the recruits states, “… Any of you guys call me Francis, and I’ll kill you,” the good sergeant replies, Lighten Up, Francis.”

So, lighten up, Sarah and posse. There are too many important issues where he is on the wrong side to worry about a silly one like this one.

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We have changed our site’s and the firm’s motto to better reflect our broad business mix. We have dropped the narrower “Thought before Calculation” for the more general “Innovative Management Solutions.” Innovation isn’t always thoughtful, but in our case it is.

Plus, we have added “Creative Web Design” to recognize a large part of our practice. Through sheer serendipity, we design and develop the kind of web sites that “everybody wants.” Our sites are good-looking, organized, easily-self-managed, and search-engine optimized. What’s not to like?

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Many supporters of Ben Bernanke (and other politicians) cite last year’s increase in the stock market as evidence that the he or they “saved the economy” and/or “prevented a depression.”

For those readers who don’t have the percentages memorized, the Dow Jones Industrial Average increased about 20% in 2009. From its nadir early last March, it increased about 61% by year-end. (Yeah, January and February ’09 were particularly cruel.)

That seems impressive, right?

Well, in 1932, the Dow Jones Industrial Average increased about 64%.

Recall that the Great Depression is supposed to have started with the stock market crash in October, 1929, and ended around 1940 or so. (Among economists who care about such things, there isn’t as much consensus about its ending as its beginning.)

Now, whether one takes the absolute peak or some other smoother measure of the index’s levels, it took until 1954 or 1955 to approach the highs of 1929 & 30.

So, while it’s very nice whenever equity markets increase, note that the extraordinary stock performance in 1932 did not signal an end to the depression.

Also, note that it took another 22 years (or so) to attain new equity index highs, and those latter highs were not adjusted downward (for the inflation) during the intervening 22 years.

So, while every reasonable and sane person hopes that the worst of the economic crisis is over, note that it need not be for many, many people or for the economy as a whole.

Now, perhaps we are inattentive, but we haven’t heard Mr. Bernanke take any credit for last year’s performance. We would attribute that to the fact that he knows more about the Great Depression than many of his supporters do.

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On the front page of the The ‘Money & Investing’ section of today’s edition of The Wall Street Journal, there is an article entitled, At SEC a Scholar Who Saw It Coming.

The article is about Henry Hu, who manages the newly-formed Risk, Strategy and Financial Innovation division at the SEC.

Though he sounds like a good guy, we don’t know much about Mr. Hu, but that’s not why we’re writing. It also mentions that in November, Mr. Wu hired Richard Bookstaber to lead staff training and data analysis, and that is a good thing. (The print version incorrectly identifies him as David Bookstaber.)

If you haven’t heard of Mr. Bookstaber, he has much knowledge and much experience working at large trading firms and hedge funds. In fact, he takes “partial credit” for a few of the past crises, including the Crash of 1987.

Mr. Bookstaber is also the author of the 2007 book, A Demon of Our Own Design, which discusses those crises, his roles in them, as well as his approach to risk (and uncertainty) management. We highly recommend the book to anyone in the financial services industry and within particular roles in other industries, too. For example, we recently recommended it to the chief of security at a large, U.S. based, multinational that operates factories and plants throughout the world.

In the book, Mr. Bookstaber makes the excellent point that overly-rigid or overly-complex risk monitoring and safety systems can actually increase the probability of failure and the loss given failure and discusses it both within and outside of financial services. (Recently, we made similar points in our analysis of intelligence failures and bad information system design.)

Besides reading the book, we also encourage our readers to visit Mr. Bookstaber’s blog, especially to read his testimony before Congress–the links in the right-hand column). It is well-written and not overly-technical.

Regarding risk and uncertainty management, Mr. Bookstaber makes points similar to ours, with the main intersection being that not every crisis is predictable, but thoughtfulness and contingency analysis goes a long way to mitigating crises. In fact, preparing (rather) general responses to possible, specific crises can prepare one for completely unknown ones, too. (See our essay on uncertainty management and almost any of our posts categorized as uncertainty or risk. By the way, we really like our post with the tongue-in-cheek title, The Role for Survivalists and Depressives in Uncertainty Management, because we think that personality traits like skepticism and pessimism are under-weighted and under-valued in most risk management hiring process.)

The best that we can tell, we tend to place more emphasis on stress-testing and scenario analysis than he does, but that’s because we think that imagination, like skepticism, is under-estimated, too.

One topic where we do disagree is his insistence that everyone (that matters) understands the limitations of the use of normal distributions in risk measures like VaR (Value at Risk). To explain, 2e’ll try to be concise but thorough but will err on the side of brevity.

It is well-known–though not wholly-agreed-upon–that assuming normality (or log-normality) mis-specifies models of returns, and we think that many ‘quants’ do know that, but they use those assumptions nonetheless, and that’s for a few reasons:

1. There is no other choice, or no other tractable choice.
2. Depending upon the context, it may not matter much.
3. Ease of calculation and effort. (This is different than (1).)
4. As a way to reduce measures of risk characteristics.
5. Ease of communication to others.

We are very sympathetic to the first two reasons, and being somewhat lazy, we are also sympathetic to the third. However, the fourth reason hints at cynicism and greed and, depending upon who is using the measure, it can be very destructive. Also, if such assumptions are used for opportunistic reasons, that can indicate the traditional weakness of risk management vis-a-vis revenue-generating departments.

The fifth reason hints that maybe–just maybe–not everyone understands the calculations and assumptions and their flaws.

We have dealt with very high-level managers at very large firms who are quite ignorant of the basic characteristics of normal distributions. To their credit, a few were quite willing to admit as much. (They are the least harmful of the bunch.) But given those experiences, it is difficult to believe that most board directors understand the arithmetic; so, it is difficult to accept that all senior managers (at such firms) understand the calculations; so, it is difficult to believe that all other managers, traders, salesmen, and investors are knowledgeable and well-informed. (And, boy, could we tell you stories!) The fact that, as Mr. Bookstaber points out in his testimony, such topics appear in textbooks is a non sequitur.

When one combines cynicism with miscommunication–whether purposeful or not–there’s a good chance that the organization is bearing more uncertainty and risk that it imagines or measures, and that’s not good. So, that fact that “everyone knows” something–even if it that something is true–doesn’t mean that it’s not abused. For example, pick any vice that every “knows” is wrong but folks do it anyway. The abuse of illegal drugs and obesity are two analogous examples. (Oh, by the way, government regulation doesn’t seem to help much there, either.)

Finally–almost–these last two issues hint at incentive problems–both moral hazard and adverse selection–that exist within firms, and we’ve written extensively about that, too, e.g., Incentives and the Financial Crisis and many more.

In sum, while we have never met Mr. Bookstaber and likely never will, we are encouraged to see the SEC hire such a knowledgeable and wise person. We wish him the best in his new role. (We only wish that we would have done so a few months earlier.)

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The article is entitled, How Green Should My Tech Be? It Depends on the Tech. The author, Robert Plant, lists and prioritizes four categories of technology projects from ‘no-brainers’ to ‘distractions.’

We are writing to mention a ‘no-brainer’ that he doesn’t. Small and medium-sized businesses should consider outsourcing their server operations to shared hosting accounts (and/or dedicated servers).

“What’s a shared hosting account” you ask? It’s a lease of server capacity–usually with limits on monthly bandwidth and on hard drive storage. Like cell phone companies, web hosting firms offer tiered pricing packages based upon expected usage, but many very small businesses need only with the cheapest packages.

For small businesses with small information system needs–web server, e-mail server, etc–the energy costs of operating their own server 24 hours a day, 365 days per year, are likely greater than the annual cost of a shared hosting account.

Depending upon the configuration and age, electrical consumption can cost between $200 — $400 per year for a single server, and many small businesses can obtain an appropriate shared hosting accounting for well less than $200 per year. Like we said, it’s a no-brainer: no (separate) hardware costs; generally no software costs, especially for those using open source web applications and servers; and no repair costs.

Now, of course, lower utility bills aren’t necessarily better if other costs are higher or if the realizing savings requires one to assume additional risks, but shared hosting accounts are, in fact, less risky than running a server from a back office or closet. Among the benefits:

• Reliability and uptime are greater and aren’t affected by local power, cable or telephone outages.
• Through a reputable hosting company, your server will be located in a well-managed, well-maintained and well-designed server farm with redundancies, backups and speeds of repair that you could not rival without a large investment and near obsessive attention to it.
• There is little-to-no risk of fire or theft of equipement, and your server management consoles can be accessed from anywhere.
• Depending upon the number of employees, your firm’s policies and procedures, and you discipline adhering to those procedures, data may be safer.
• If required for web-based transactions, static IP addresses and SSL certificates are available for shared hosting accounts, too.

While it is outside the scope of this post, medium-sized firms with greater information demands should consider leasing dedicated servers at such server farms via the same types of web hosting accounts: annual cost approximately $5,000 or so.

One note of caution: like anything else, the cheapest hosting service isn’t always the best. Get a reputable one that replies quickly to inquiries and service requests, preferably in English. For that we whole-heartedly (and without compensation) recommend Fused Network.

P.S. For small network backup needs, consider something energy-efficient like the Acer Aspire EasyStore AH340. We love ours.

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We find that very irritating because as a foreign national and enemy combatant, he has no such rights; so, they could not be “read to him.”

The fact that an FBI agent read or explained the Miranda warning to him does not confer those rights upon him.

The largest error was not or is not that he was given a warning that did not then and does not now apply to him. Instead, the largest error is that he continues to be treated as a criminal rather than as an enemy combatant.

So, the initial FBI error (of attempting to confer rights upon someone who does not have them) is correctable. Instead of complaining about the actions of FBI agents on Christmas Day, critics should continue to focus on the wimpiness and stupidity of the Obama administration for continuing to treat an enemy-of-the-state like a shoplifter.

Mr. Obama, take your inaugural pledge seriously, and send him to Gitmo.

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This weekend there are many reports and commentaries regarding the U.S. Senate vote to confirm Ben Bernanke to a second term as the Chairman of the Federal Reserve. For example, see the article Backers Rally to Bernanke in The Wall Street Journal.

Mr. Bernanke neither deserves a second term nor can we, as a nation and economy, afford it.

Don’t Blame Him for any Bubbles

Many commentators, analysts, and economists blame Mr. Bernanke’s (and his predecessor, Alan Greenspan’s) easy money policies for creating a sequence of bubbles.

We don’t. As far as we can tell, prior to 2008, Mr. Bernanke did not force a single person or firm to borrow an additional dollar or invest in assets and securities that they did not understand. See our post The Low Interest Rates Made Us Do It: Oh, How Lame! from August, 2008. Note that Community Reinvestment Account (CRA) policies were not his diktat. In fact, their initial implementation in 1977 far precede his involvement at the Fed.

His Flawed Policies Aren’t Disqualifying

In addition, as much as we dislike his statist policy prescriptions to end the liquidity crisis that began in the Fall of 2008, we don’t think that alone is reason to deny his confirmation.

However, every TARP-addled, self-congratulatory politician, bureaucrat, and regulator wishing to take credit for staving off a new depression, should note that during the “The Great Depression,” the Dow Jones Industrial Average gained 63.74%  in 1932. HOWEVER, it took an additional 20 years–that’s 20 years–for the Dow to reach its pre-crash highs of 1929.

Thus, if you, dear reader, confidently “know” or strongly believe that because the Dow has rallied since last March, that necessarily means that the crisis has ended with little or no chance of returning, then you are, indeed, a short-sighted fool (with little awareness of history).

So, if (1) we don’t blame him for the consumer and investor behavior that led to the mortgage debacle that led to the liquidity crisis and (2) we don’t think that his policy response to the crisis, in and of itself, is disqualifying, then what is it?

His Panic & Terror Were Unconscionable

It was his panicked response to the mortgage debacle that helped turn it into a liquidity crisis and severe recession. It wasn’t his policy prescriptions, it was the way he tried to sell them. He wasn’t alone. Former President Bush, Congressional leaders, and ex-Treasury Secretary Hank Paulson also deserve much of the blame, and we gave it to them, but he should have known better. (See, for example, Well, This Is a Fine Mess You’ve Gotten Us into.… or just about anything else that we wrote from September — December, 2008.)

During the spring and summer of 2008, we asked on several occasions: why are the losses so concentrated this time? See, for example, this search or this tag or this one. (There’s some overlap.)

The rather concentrated mortgage debacle informed investors and creditors that bank managers were far less capable than had been believed. As confidence in the banks shrank, our public servants panicked and eeked and squeaked like little girls.

Their collective panic and terror destroyed public confidence–not just in the banks–that was justifiable–but in the economy as a whole. Their threats and overstatements became self-fulfilling, and permitted cynical managements at non-financial corporations to lay-off employees. Those actions immediately deepened the downturn and destroyed consumer and investor confidence. It still has not recovered. (By the way, by non-financial, we don’t mean that hopeless and hapless auto manufacturers. Given their precarious states, they were doomed to fail whenever a recession occurred.)

Perhaps by 2008, he had spent too much time in Washington and had forgotten that words and statements have real implications. There are sound reasons why it is illegal to shouts “Fire!” in a crowded theater (and risk a public catastrophe). In our mind, that’s what Mr. Bernanke and his cronies did. Words are not merely “throw-away” rhetoric used to attempt to influence undecided senators and representatives to support a hastily-composed bill, especially when done publicly.

Clearly, we don’t believe that “if you don’t have anything nice to say you shouldn’t say anything at all.” If we did, we would have published a total of about fifteen posts since we started writing on April 1, 2008.

We do, however, think that if one have a position of responsibility, then one should act and speak responsibly, and Mr. Bernanke did not do so when it mattered the most. We can forgive such behavior, but we can’t forget it, so we don’t trust him. So, for what it’s worth, we recommend that Mr. Bernanke not be reconfirmed.

Related posts:

• How Were the Last Nine Months of 2009 like 1932?
• Out of Their Elements
• Did Anyone Notice the Irony?
• Okay, This Might Work
• OMG! OMG! OMG! Largest US Bank Failure Ever!

This morning’s Gospel included Luke 4:18.

That’s where Jesus returns to Nazareth, goes to the synagogue, and reads aloud from the scroll of Isaiah.

What interested us was (our paraphrase of) one of the lines from Isaiah: “He has sent me… to let the oppressed go free.”

We wondered: of the subset of the folks who were listening,  how many of our (relatively fortunate and middle-class) fellow parishioners thought, “Yes, Lord, that’s me. I’m oppressed. Please help. Please set me free. Please stop the oppression by my spouse-children-parents-classmates-bosses-teachers-neighbors-creditors-clients-patients-etc.”

We also wondered how many of the others thought that he or she were the singularly most oppressed person in the entire congregation. Of course, in that respect we knew, beyond any reasonable doubt, that anyone else who had drawn that conclusion must be wrong.

If they considered it, we suspect that they would know that we were just as wrong, and to be honest, they would be right.

Ah, the human condition.

Related posts:

• Geographic Good Fortune
• Prohibition, “Black Liquor” and Freedom