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| http://www.gilder.com/ | Issue 354.0/September
5, 2008
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HEADLINES:
- The Week / Bring on the Bandwidth (BBC interview w/George
Gilder)
- Friday Feature / Steve Forbes: Dollar
Diplomacy
- Friday Blogger Bonus / Google’s
Chrome Details
- Readings /
The Week / Bring on the Bandwidth
Peter Day, BBC Radio’s “In Business” (9/04/08): It must be 15 years since I
first went to see George Gilder, prophet of the Telecosm, at his farmhouse deep
in the rolling Berkshire Hills in Massachusetts. In those days his daughter
kept sheep, and their bells tinkled through the “In Business” interview I did
with him about the coming of the Internet.
It was particularly memorable because afterwards his wife Nini invited us to
stay for supper, and on the menu were fiddlehead ferns, the asparagus-like tops
of bracken which are only edible during a few short weeks of spring, when they
are quite delicious.
This summer, with the ferns full-grown and out of season, I went back to see
him again., and he is one of the contributors to this week’s “In Business”.
Because nearly everything that George Gilder has been predicting about
communications is now in the process of coming true.
George Gilder has had many insights about many different things, but perhaps
the most striking is all about bandwidth.
He saw maybe 20 years ago, that what Moore’s Law predicted about the way
computer power on a silicon chip was doubling every two years was roughly
paralleled by the way bandwidth was getting cheaper and more abundant at an
even faster speed.
Put the two together (in this thing called the “telecosm”) and an extravagant
networked world was about to emerge and transform the way we live. In particular,
he thought then and still thinks now, television is doomed.
Well, it’s been happening, and wherever you go in cyberspace, up will pop
someone who will tell you that George Gilder is one of his or her prime
inspirations.
Meanwhile, Mr Gilder has himself been having adventures.
During the dot com boom of the 1990s, he became a much followed newsletter
writer, enthusing about starter companies who were going to benefit from all
this convergence.
Shares in the companies he mentioned soared ... the Gilder effect it was
called. And he invested in his own recommendations, too. At the height of the
boom, George Gilder had a paper value of $200million. And then it was burst.
And his paper worth became negative equity... $10million worth, he says. He is
still trying to pay it off.
But that in no way undermines George Gilder’s great perceptions about
connectivity. And if broadband connectivity had been universally available ten
years earlier, then maybe the dot com bubble would not have burst quite as
definitively as it did in 2000.
I have to report that the sheep (and the daughters) are now gone from home,
replaced in the background of the latest interview by the mooing of a
neighbouring farmer’s cows.
But it was another notable visit. After we left, the Gilders were going a few
miles for his mother’s 90th birthday. She was celebrating by playing the piano,
to accompany the cello of a neighbour, Yo-Yo Ma.
Listen to the complete interview:
http://www.bbc.co.uk/radio4/news/inbusiness/inbusiness.shtml
|
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Friday Feature / Dollar Diplomacy
Steve Forbes, Forbes.com “Fact and Comment” (8/28/08): President Bush can start to
reverse the U.S.' and the west's Carteresque response to Russia's subjugation
of Georgia by strengthening the U.S. dollar. In 2004 the weak dollar triggered
a global commodities boom--just as it did in the 1970s. Major
commodity-producing countries such as Russia have since received revenue
windfalls of hundreds of billions of dollars. The higher the price of oil, the
more assertive Moscow has become in its foreign policy.
In 1981 Ronald Reagan fearlessly attacked a rise in inflation far worse than the current one. He succeeded. The dollar was strengthened, and interest rates came tumbling down. Then sky-high oil prices tumbled, from almost $40 a barrel to $10 by the mid-1980s. That precipitous fall in oil was a critical--and utterly unappreciated--factor in the Soviet Union's collapse. Mikhail Gorbachev ascended to power with the vigorous support of hard-liners. Starved for hard currency, he turned to such liberalizations as glasnost and perestroika out of desperation, not principle.
Strengthening
the dollar with Reaganesque determination would send oil to the
$40--to--$50-per-barrel range. At the same time the U.S. and its allies could start
putting restrictions on Russian/oligarch-held bank accounts in Europe and here.
Another
culprit in the continuing currency crisis, in addition to the weak dollar, is a
seemingly arcane accounting principle called mark to market (MTM). The concept
was formalized last November by the Financial Accounting Standards Board and
mandates that most financial assets held by financial institutions be repriced
constantly to reflect the value of those particular assets in the marketplace.
The
concept makes perfect sense for liquid securities, such as Treasurys and most
publicly traded equities. The problem arises in new kinds of securities for
which there is no established liquid market. Active trading in most of the
packages of subprime mortgages and other exotic instruments is almost
nonexistent, yet the accounting profession dictates that an institution must
value a security at whatever price it would fetch if it were suddenly dumped on
the market. If there is no market, then the bank or insurance company must slash
the value of the security, possibly all the way to zero. Even if subprime
mortgages are current--that is, payments of principal and interest are being
made--the holding institution must whack the book value of those securities.
Many of the big writedowns from banks and insurance companies aren't derived
from actual losses but from sheer guesses or evaluations based on arbitrary
computer models.
When
rigidly applied to nonmarketable securities, MTM--or what critics call
"mark to make-believe"--exacerbates credit cycles. It feeds a down
cycle and gooses an up cycle. When times were good, such as the 2004--06
period, the markups encouraged more dicey lending--the fees were good, the book
profits were great (MTM here meant markups) and bankers reaped outsize bonuses.
Accountants
and regulators should apply some common sense to hard-to-value assets. For an
asset intended to be held to maturity, there ought not be any writeups or
writedowns except under extraordinary circumstances, such as if a class of assets
were clearly deteriorating. Neither losses nor gains should be booked until
they're actually realized. There certainly shouldn't be the wholesale writeoffs
we are now experiencing.
Of
course, current problems with the MTM concept shouldn't stand in the way of
rules for more transparency, for barring banks and insurers from putting exotic
financial assets off their balance sheets. Regulators and financiers should
create standards for these kinds of securities so that we have helpful,
market-friendly standardization. But in the meantime the SEC, which oversees
the accounting profession, should mandate temporary time-outs on these
mark-to-market insanities.
More from Steve Forbes:
http://www.forbes.com/business/forbes/2008/0915/023.html
__________________________________________
Friday Blogger Bonus / Google’s Chrome Details
Wendy
Tanaka, Forbes.com “The Web’s Edge” (9/02/08): Call it Google's silent shot
across the bow to archrival Microsoft.
The Internet giant on Tuesday unveiled details of its new Web browser, Google Chrome, aimed at challenging the dominance of the software giant's Internet Explorer.
At
a press conference at the Googleplex, company officials and engineers never
mentioned IE by name but invoked the Microsoft software in a score of other
ways. They showed several times how Chrome can load Web pages hundreds of times
faster than IE, how it can continue to work even if one Web page crashes, and
and how it helps users track and organize where they go on the Web. And unlike
IE, Chrome is built on open-source code, they noted.
Google's
Chrome Comics
(Video)
http://www.forbes.com/video/?video=fvn/tech/km_google090308
"Our
intent is to drive the Web platform forward," said Sundar Pichai, vice
president of product management at Google, as he demonstrated Chrome's features
to a group of reporters Tuesday. "If the Web gets better, more users use
the Web, and Google benefits. We care about this a lot."
Chrome
automatically tracks users' favorite Web pages for easy access and can save
them in "Tabs" at the top of users' home pages. By not attaching
cookies, it also lets users hide searches they don't want others who might use
their computer to see.
A
tab labeled "Incognito" allows users to hide a search on, say, toe
fungus, so that anyone who uses that same computer won't catch sight of the
previous search. Even so, such phantom searches won't impede Google's
blockbuster advertising business, which is based on collecting data about user
searches, Pichai said. Although the searches will remain hidden from others who
use the same computer the search is conducted on, advertisers will still be
able to track the searches on the Web.
Launched last week, Microsoft's IE 8, the latest version of the software giant's browser, has similar features that allow users to delete some or all Internet files and cookies after browsing.
Another
Chrome feature is its so-called multiprocess architecture, which lets Web pages
continue to function even if one goes down. Right now, "one application
can take a whole browser down," Pichai said. "Not in Chrome. Even if
something is happening in one tab, the other tabs are still responsive. This
makes it more stable too, and the browser doesn't slow down because one app is
slow."
Chrome's
speed is due to a technology Google calls "V8" (no, not the vegetable
juice), which is basically a virtual machine.
The
first beta, or test, version of Chrome, which was two years in the making,
became available for free downloads on Tuesday for the Windows operating system
in 43 languages and 122 countries. Google is working on versions for Mac and
Linux operating systems.
Google
founders Larry Page and Sergey Brin made guest appearances at the conference.
Brin, who came in unannounced near the end, dressed casually in a T-shirt,
jeans and red Crocs, says he works on a Mac and is eager for a Chrome version
for Mac.
Asked
what kind of market share he expects from Chrome, Brin said Google doesn't have
any expectations. "We don't have a set number for what will happen,"
he said. "We want to have several browsers out there that are viable
choices"--not a situation where 80% of the market uses one browser, he
said. "We want to see more choices and Web developers compelled to open
Web standards."
More
on Google from Forbes.com:
http://www.forbes.com/technology/2008/09/02/google-browser-chrome-tech-enter-cx_wt_0902chromeworks.html
__________________________________________
Readings /
Louisiana Goes Nuclear
http://greenwombat.blogs.fortune.cnn.com/2008/08/26/louisiana-goes-nuclear/
A Network that Builds Itself
http://www.technologyreview.com/Infotech/21327/?a=f
Can Steve Jobs Save the iPod
http://apple20.blogs.fortune.cnn.com/2008/09/04/can-steve-jobs-save-the-ipod/
An eBay for Interest Rates
http://www.technologyreview.com/Infotech/21280/?a=f
National
Semi Net Drops
http://online.wsj.com/article/SB122063163986704291.html?mod=hpp_us_whats_news
Finding Cracks in Facebook
http://money.cnn.com/2008/05/12/technology/cracks_facebook_hempel.fortune/index.htm?postversion=2008051308
Exactly What's Under the Chrome, Anyway?
http://www.wired.com/techbiz/media/news/2008/09/portfolio_0905
Nokia warns 3Q market share will fall; shares dive
http://news.wired.com/dynamic/stories/F/FINLAND_NOKIA_MARKET_SHARE?SITE=WIRE&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2008-09-05-10-18-09
__________________________________________
Friday Letter Editor: Mary Collins George / mcollins@gilder.com
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