Friday, January 28, 2011

Mixed Feelings About the "Billionaire's Pledge"

No doubt by now you've heard of "The Giving Pledge." Founded by Bill Gates and the increasingly-irritating Warren Buffett, it is a public pledge to give the majority of one's wealth to charity. You can see who's ponying up here:

The List

How could I possibly have mixed feelings, you ask? It's all good, right?

Not exactly.

The question is not just how much social utility is created by the donation, but how much disutility is created by the extraction of the capital from our economy.

Let's examine both sides of this in the recent pledge by list member Mark Zuckerberg to give $100 million to the Newark public school system. How much utility is being created? Well, none. In fact, it's probably a big negative. Zuckerberg is demonstrably one of the smartest people of his generation, but this gift is one of the dumbest of all time, exceeded only by Ted Turner's $1 billion gift to the United Nations.

Both these gifts are examples of egregiously bad philanthropy, otherwise known as throwing good money after bad. New Jersey public schools are broken, and it's not a problem money can fix. In fact, money allows the problems to persist longer. The problem, in a nutshell, is the teachers unions, which have become a black hole of salaries, benefits, and bizarre work rules. Everything they do is antithetical to the interests of parents and students. $100 million thrown into this swamp will merely postpone the day of reckoning and allow students to be educationally abused that much longer.

Zuckerberg isn't, as we've established, an idiot. He either knows this, or could have figured it out. But that's hardly the point, is it? By some amazing coincidence, Zuckerberg was having some pr problems at the time of the gift, namely a movie called The Social Network that was making him look like a nasty piece of work. $100 million for the kids, a quick appearance on Oprah and 60 Minutes, and presto! All is well again.

The fact is, most philanthropy is accompanied by ulterior motives of some sort. Otherwise, it would all be anonymous, right?

Okay, I can hear you. You say big deal, a little ego-rubbing is a small price to pay. In some cases, I agree with you. Free markets will never solve every last social problem. In these cases, I prefer private philanthropy to solve the problem, because it will likely do a better job of it - and be more accountable - than the government. (In fact, one of the things I detest about big government is that it tends to crowd out effective private philanthropy. Just look at Europe.)

But, as with Zuckerberg and Turner, not all philanthropy solves problems. Sometimes, they make it worse. Philanthropy, poorly conceived, is replete with moral hazard.

It ain't always easy giving money away.

Ironically, I think it's Bill Gates who has his arms around this better than anyone. The Gates Foundation thoroughly analyzes where their money can create the greatest social utility for the dollar. The answer is often less-than-sexy things like mosquito netting in Africa and sewer systems in India.

But let's get back to the other side of the equation, the disutility created by removing capital from our economy. Our billionaires club presumably funds its charitable gifts by selling their company stock, or the stock of other companies. This capital creates jobs. the people that get those jobs pay taxes, buy homes, have families, and otherwise do things that create even more jobs. They even give to charity. It's a virtuous cycle, and there's no charity than can match the social utility of job creation.

For charity to be worthwhile, the social utility of a donation (not always positive, as I've mentioned) must exceed the disutility of the capital extraction from the private sector. This is not always an easy hurdle.

Mark Zuckerberg is in his 20s. He has created not just thousands of jobs at Facebook, but an entire new industry that is having profoundly positive effects. Silicon Valley is a boomtown again, and if our country is to find a way out of our current mess, the Valley will lead the way. But my point is, I don't want Zuckerberg thinking about charity. He's too valuable doing what he's doing. Later in his life, when his years of intense creativity are behind him, he can start giving it all away. I'm sure by then, when he has time to ponder the variables, he will make more intelligent decisions.

Thursday, January 13, 2011

Comments on the Consumer Electronics Show

140,000 people jammed this year's CES in Las Vegas. I'd never been before, so the scope was breathtaking. There had to be fifty football fields of exhibition space. It was easy to get lost. I'm told that some of the individual corporate exhibits cost $3-4 million to construct.

Overall, I will say that this was an incremental show. Everything was a little faster, a little bigger (or smaller), a little cheaper. There wasn't much I would describe as revolutionary, other than Looxcie, which I wrote about here.

General impressions:

  • Lots and lots of tablets - everyone wants a piece of the iPad market (50 million tabs will have been sold by the end of '11)
  • Cars, particularly Fords, are getting wired with all sorts of goodies
  • 3D TV is being pushed heavily, but consumer acceptance is questionable
  • Internet-enabled TV will be the standard within a couple of years, whether people want it or not
  • I heard dozens of languages, but the Asian presence was particularly strong

Some specifically cool things:

  • A company is making a single, secured credit card with embedded electronics that can be used with any of your accounts, so you won't have to carry around six cards in the future. It's also rendered unusable if stolen.
  • There's now 3D television that doesn't require glasses. It was pretty cool, but the problem is it only works if you stand in certain places. A techie guy next to me said that this was a non-fixable issue.
  • Intel is now fitting a billion transistors on a chip the size of your thumb. The first transistor-based computers had 500 transistors and definitely not the size of your thumb.
  • Acer won the "Last Gadget Standing" with a laptop that had two touchscreens. The second one is where the keyboard is normally found. It was pretty bulky, but this problem will solve itself. The techies loved it.
There was so much going on at this show that I think they ought to split it into five or six separate shows. Like running a marathon, though, I recommend doing it once.

Wednesday, January 12, 2011

Monday, January 10, 2011

The Game Changer I Saw At the Consumer Electronics Show

Just saw the first thing here at the CES that I think is a game changer with some profound implications. Not even sure the manufacturer has thought through all the societal implications.

A company called Looxcie is coming out with a bluetooth enabled camera that fits right on your earpiece. It films everything you see and can, with the push of a button, upload what you just filmed to YouTube, Facebook, or twitter. It can even do live streaming.

Here's the cool part. As these devices spread, you will be able to tune into just about anything, anywhere in the world. Riots in Jakarta? Watch it live. Springsteen at the Meadowlands? Watch it live.

Here's another development we can expect: celebrities or other self absorbed types will stream their lives to the world 24/7. Why should Ashton Kutcher simply tweet he is getting coffee when he could broadcast the experience? If your life is boring, you will tune into the lives of others. Reality TV to the tenth power.

People - and not just celebrities - will use streaming video to build out their personal brands. Product placements will become big business - the next advertising frontier of the digital age.

I also predict that in the not-too-distant future people will use these cameras to document their entire lives so that at any point they can retrieve archived footage of any moment of their existence.

Which gets me to the creepy part. As it is, these devices are small, but in a couple of years you won't be able to tell someone's wearing one. In other words, you could be getting filmed at any time and not know it. Lots of people will get filmed saying and doing things that won't play well on the internet. Social interaction will become guarded.

I predict this device will be ground zero for the privacy wars. Congress will get in the act (particularly since they're the ones always getting caught doing embarrassing things). Stay tuned.

Monday, January 3, 2011

America the Porky

So I was at a theme park recently...the theme was, "Get in line, fatty."

                                                                     -Zach Galafianikus

GDP Since Jesus

Thought this was great, courtesy of the Economist. Here comes China: