Great new issue of O'Reilly's Release 2.0 magazine out, including extensive discussion of financial technologies (and an interview with yours truly). More here.

A while back Fred Wilson started a firestorm with a series of three posts (1, 2 and 3) about age and the entrepreneur. The gist: He was seeing more and more young tech entrepreneurs, most of them under 30, and some even in their teens, and he wondered aloud at what that meant for the future of tech entrepreneurs.

Lots of people took noisy issue with Fred, while some agreed. The fundamental problem, however, was that most of the data was anecdotal, which makes an substantive discussion tough.

Today, however, there is a new report out from my friends at the Kauffman Foundation on precisely this question: The age (and education) of U.S. tech entrepreneurs. What is the distribution? How is it changing?

Perhaps surprisingly, the report shows that U.S. tech entrepreneurs are, if anything, older than expected. People founding tech companies over the last ten years had an average and median age of 39-years, nowhere near the age that makes for good stories about dorm room entrepreneurs -- and older than many of us might have thought.

There is lots more in the report, but here is a figure on the age issue:

Great analysis and figure from my friend Toby of the social networks among the public company boardroom set. Click for a larger version.

The following figure is from a new Mckinsey report on profligate power usage by data centers:

Quote of the day comes from a WSJ story about Microsoft's ongoing tussle for Yahoo -- most of which is apparently happening inside Microsoft CEO Steve Ballmer's head:

People familiar with the situation said that [delays] have been at least partly attributable to Mr Ballmer, following a regular pattern for the 28-year Microsoft veteran, who has led the company for eight years. The former salesman has a history of shifting his opinion suddenly and sometimes being easily swayed by new data or a new perspective that refutes his existing opinion, these people said.

In recent weeks, Mr Ballmer has appeared to be leaning towards launching a hostile bid for Yahoo and walking away ...

Precisely. Ballmer's vacillating -- typical sales-guy behavior -- is a big part of the problem here. And, reading between the lines, insiders are laying the groundwork for Ballmer to be the fall guy, whatever happens on this deal.

Economist Paul Collier, who gave a riveting talk at this year's TED conference, has an unsurprisingly clear-eyed take on one cure for the current escalation in global food prices: Broadened large-scale commercial agriculture. While that might seem obvious, it is far from the favored solution in many countries.

The remedy to high food prices is to increase food supply, something that is entirely feasible. The most realistic way to raise global supply is to replicate the Brazilian model of large, technologically sophisticated agro-companies supplying for the world market. To give one remarkable example, the time between harvesting one crop and planting the next, in effect the downtime for land, has been reduced an astounding thirty minutes. There are still many areas of the world that have good land which could be used far more productively if it was properly managed by large companies. For example, almost 90% of Mozambique’s land, an enormous area, is idle.

Unfortunately, large-scale commercial agriculture is unromantic. We laud the production style of the peasant: environmentally sustainable and human in scale. In respect of manufacturing and services we grew out of this fantasy years ago, but in agriculture it continues to contaminate our policies. In Europe and Japan huge public resources have been devoted to propping up small farms. The best that can be said for these policies is that we can afford them. In Africa, which cannot afford them, development agencies have oriented their entire efforts on agricultural development to peasant style production. As a result, Africa has less large-scale commercial agriculture than it had fifty years ago. Unfortunately, peasant farming is generally not well-suited to innovation and investment: the result has been that African agriculture has fallen further and further behind the advancing productivity frontier of the globalized commercial model.

[via FT]

We examine the impact of two post-9/11 airport security measures—baggage screening and federalization of passenger screening—on demand for air travel in the United States. Exploiting the phased introduction of security measures across airports, we find that baggage screening reduced passenger volume by about 6 percent on all flights and by about 9 percent on flights departing from the nation’s 50 busiest airports. In contrast, federalizing passenger screening had little effect on passenger volume. We provide evidence that the reduction in demand was an unintended consequence of baggage screening and not the result of contemporaneous price changes, airport-specific shocks, schedule changes, or other factors. This decline in air travel had a substantial cost. Back-of-the-envelope calculations indicate that the airline industry lost about $1.1 billion because of the decline, which is 11 percent of the loss attributed directly to 9/11.

Microsoft is walking, it says, from its Yahoo bid. Not a surprise given the history and given Ballmer's confused approach, but it is an open questions whether this is mere stratagem, a "for keeps" move away from the entire transaction , or presages an eventual hostile follow-up.

The full release and letter are here. What a mess, one that reflects horribly on both firms -- and will likely eventually cost both CEOs their jobs.

[Update] Near as I can tell, Kara was among the first to have this, so credit to where credit is due.

Here is the full press and "Dear Jerry" letter from Microsoft's Ballmer on calling it quits on the Yahoo acquisition. Via PR Newswire:

Microsoft Withdraws Proposal to Acquire Yahoo!

REDMOND, Wash., May 3 /PRNewswire-FirstCall/ -- Microsoft Corp. (Nasdaq: MSFT) today announced that it has withdrawn its proposal to acquire Yahoo! Inc. (Nasdaq: YHOO).

"We continue to believe that our proposed acquisition made sense for Microsoft, Yahoo! and the market as a whole. Our goal in pursuing a combination with Yahoo! was to provide greater choice and innovation in the marketplace and create real value for our respective stockholders and employees," said Steve Ballmer, chief executive officer of Microsoft.

"Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo! has not moved toward accepting our offer. After careful consideration, we believe the economics demanded by Yahoo! do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal," said Ballmer.

"We have a talented team in place and a compelling plan to grow our business through innovative new services and strategic transactions with other business partners. While Yahoo! would have accelerated our strategy, I am confident that we can continue to move forward toward our goals," Ballmer said.

"We are investing heavily in new tools and Web experiences, we have dramatically improved our search performance and advertiser satisfaction, and we will continue to build our scale through organic growth and partnerships," said Kevin Johnson, Microsoft president for platforms and services.

Below is the text of the letter from Microsoft CEO Steve Ballmer to Yahoo! CEO Jerry Yang.

May 3, 2008

Mr. Jerry Yang
CEO and Chief Yahoo
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089

Dear Jerry:
After over three months, we have reached the conclusion of the process regarding a possible combination of Microsoft and Yahoo!.

I first want to convey my personal thanks to you, your management team, and Yahoo!'s Board of Directors for your consideration of our proposal. I appreciate the time and attention all of you have given to this matter, and I especially appreciate the time that you have invested personally. I feel that our discussions this week have been particularly useful, providing me for the first time with real clarity on what is and is not possible.

I am disappointed that Yahoo! has not moved towards accepting our offer. I first called you with our offer on January 31 because I believed that a combination of our two companies would have created real value for our respective shareholders and would have provided consumers, publishers, and advertisers with greater innovation and choice in the marketplace. Our decision to offer a 62 percent premium at that time reflected the strength of these convictions.

In our conversations this week, we conveyed our willingness to raise our offer to $33.00 per share, reflecting again our belief in this collective opportunity. This increase would have added approximately another $5 billion of value to your shareholders, compared to the current value of our initial offer. It also would have reflected a premium of over 70 percent compared to the price at which your stock closed on January 31. Yet it has proven insufficient, as your final position insisted on Microsoft paying yet another $5 billion or more, or at least another $4 per share above our $33.00 offer.

Also, after giving this week's conversations further thought, it is clear to me that it is not sensible for Microsoft to take our offer directly to your shareholders. This approach would necessarily involve a protracted proxy contest and eventually an exchange offer. Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo! undesirable as an acquisition for Microsoft.

We regard with particular concern your apparent planning to respond to a "hostile" bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid Internet search terms offered by Yahoo! today. In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo! undesirable to us for a number of reasons:

-- First, it would fundamentally undermine Yahoo!'s own strategy and long-term viability by encouraging advertisers to use Google as opposed to your Panama paid search system. This would also fragment your search advertising and display advertising strategies and the ecosystem surrounding them. This would undermine the reliance on your display advertising business to fuel future growth.

-- Given this, it would impair Yahoo's ability to retain the talented engineers working on advertising systems that are important to our interest in a combination of our companies.

-- In addition, it would raise a host of regulatory and legal problems that no acquirer, including Microsoft, would want to inherit. Among other things, this would consolidate market share with the already-dominant paid search provider in a manner that would reduce competition and choice in the marketplace.

-- This would also effectively enable Google to set the prices for key search terms on both their and your search platforms and, in the process, raise prices charged to advertisers on Yahoo. In addition to whatever resulting legal problems, this seems unwise from a business perspective unless in fact one simply wishes to use this as a vehicle to exit the paid search business in favor of Google.

-- It could foreclose any chance of a combination with any other search provider that is not already relying on Google's search services.

Accordingly, your apparent plan to pursue such an arrangement in the event of a proxy contest or exchange offer leads me to the firm decision not to pursue such a path. Instead, I hereby formally withdraw Microsoft's proposal to acquire Yahoo!.

We will move forward and will continue to innovate and grow our business at Microsoft with the talented team we have in place and potentially through strategic transactions with other business partners.

I still believe even today that our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares. By failing to reach an agreement with us, you and your stockholders have left significant value on the table.

But clearly a deal is not to be.

Thank you again for the time we have spent together discussing this.

Sincerely yours,
/s/ Steven A. Ballmer

Steven A. Ballmer
Chief Executive Officer
Microsoft Corporation<

Here is my first-cut analysis of what has happened here:

• On the friendly front, Yahoo drew a hard line at $37 per share, well above the $33 that Microsoft now says it told Yahoo this week it was willing to go
• On the hostile front, Yahoo apparently told Microsoft -- as I surmised and said early on -- that it was prepared to take steps to mess itself up to prevent a hostile acquisition or proxy battle. In particular, Yahoo was prepared to outsource key search terms to Google, which is, in my mind, goofy, mischievous, and unlikely to stand up to regulatory or legal scrutiny.

As a result, when faced with too high of a spread to the acquisition price on a friendly basis, and a company prepared to gut itself, with Google's help, to prevent a hostile action, Microsoft is saying it will walk away.

Now, will it stay away? Good question. Anything can happen in these things, and a lot will depend on what happens to Microsoft and Yahoo stock in the first few days of next week. Yahoo could see a fusillade of lawsuits if its stock falls to the teens, especially given the length it is apparently willing to go to prevent a hostile offer from going through. In other words, we could see Microsoft back again.

Bottom-line for me: This has a been a risky and poorly managed affair from end-to-end. Both CEOs deserve immense blame -- Ballmer for vacillating; Yang for running a public company without the foremost regard for shareholders -- and they are likely to be the two people who suffer the most indignities (including possible termination) over the coming weeks and months.

Other collateral damage: Major shareholders who built up positions in anticipation of this, especially Bill Miller at Legg Mason, who was beginning to see his year turn around after two nasty years of lagging the market. Also a host of M&A arbs, most of whom thought that Microsoft had no choice but to go hostile, and are now going to see even that premium come out of the stock, at least until the legal actions start up.

[Update] The more I think about it, the more Yahoo (and maybe Microsoft too) reminds me of that crack suicide squad in Monty Python's Life of Brian.

OTTO:

Ve are the Judean People's Front. Crack suicide squad. Suicide squad! Attack!

[drum roll]

J.P.F.:

Uh! Ugh. Aggh...

OTTO:

That showed 'em, huh? Oooh.

[whump]

BRIAN:

You silly sods.

This is rapidly turning into two post-tryst teens texting one another hate messages -- u suck! no, u suck! -- but Yahoo is now out with a response to Microsoft's response about its decision to terminate its takeover offer for Yahoo. Here is the release in its entirety:

Yahoo! Issues Statement in Response to Microsoft

SUNNYVALE, Calif., May 03, 2008 (BUSINESS WIRE) -- Roy Bostock, Chairman of Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company issued the following statement today in response to Microsoft Corporation's announcement that it has withdrawn its proposal to acquire Yahoo!:

"We remain focused on maximizing shareholder value and pursuing strategic opportunities that position Yahoo! for success and leadership in its markets. From the beginning of this process, our independent board and our management have been steadfast in our belief that Microsoft's offer undervalued the company and we are pleased that so many of our shareholders joined us in expressing that view. Yahoo! is profitable, growing, and executing well on its strategic plan to capture the large opportunities in the relatively young online advertising market. Our solid results for the first quarter of 2008 and increased full year 2008 operating cash flow outlook reflect the progress the company is making. Today, Yahoo! has:

-- a refined strategic focus to drive enhanced volume and yield;

-- reorganized to focus its efforts on its most promising products and services;

-- invested in innovations designed to revolutionize display advertising and facilitate closing the competitive gap in search; and

-- enhanced expense and resource management to support improved profitability."

Jerry Yang, co-founder and chief executive officer, Yahoo! Inc. added, "I am incredibly proud of the way our team has come together over the last three months. This process has underscored our unique and valuable strategic position. With the distraction of Microsoft's unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history so that we can maximize our potential to the benefit of our shareholders, employees, partners and users."

Sure, shareholders thought they could get more money out of Microsoft, but did a quorum really believe they could get $37 a share, after Microsoft already offered its sizable original premium and offered to up the bid to $33-ish?

All in all, this strikes me as a fairly unsubtle example of whistling past the graveyard. Come on, the quarter was no hell, and promising a better 2008 is a lovely fantasy, but not exactly grounded in the real world. The rest of the "progress" cited in this note gives the word "vague" a bad name.

So, what happens next? Microsoft has walked away from Yahoo, or at least from its current takeover offer, and is saying it will move forward organically  -- and said word with its reek of cattle feces is appropriate here. Yahoo, for its part, cites -- with less specifics than my six-year-old gives at day-end when claiming "good behavior" -- the many golden wonders ahead of it in its post-Microsoft future.

I don't buy either argument. Here is why, in two parts:

• If Microsoft could have solved its advertising and content problems organically, it wouldn't have been forced to make an outsize and humbling bid of former web wunderkind Yahoo. It's not exactly short of cash, people or need. To say that it now has the magic solution is, let's just say, the triumph of hope over recent experience.
• If Yahoo really had in place the pieces to make a run at being ... something, we wouldn't be seeing the key employee attrition and weak revenue/traffic growth that we currently see. After all, the only thing that saved Yahoo's earnings bacon in the just-completed quarter was money gifted from Alibaba gains. It wasn't a changed company that did it, and wasn't the magic of Jerry Yang.

I think what has largely happened here is we have bought time and lawsuits. If I was a Yahoo shareholder I'd be seriously pissed. Microsoft pulled us out of our recent share price slump, but management was too cutesy and territorial to take the money and run. My guess is that Yahoo's share price falls quickly on Monday, and then finds support in the low-$20, a price reflecting a belief that this is not yet over. Only then, once some key shareholders pipe up and once Yahoo has to defend itself against the inevitable lawsuits, will we know how likely it is that its brazen move sticks.

Other thoughts? Bring 'em on.

Kara Swisher remains waaaay plugged-in on this Yahoo/Microsoft deal. Beating Monday's papers (and her WSJ compatriots' inevitable Monday piece) by ... oh, 36 hours or so, she has up the first credible tick-tock of how the Yahoo/Microsoft deal devolved to this.

Read it and see how Jerry Yang and Steve Ballmer make Felix Unger and Oscar Madison seem like French-kissing soulmates.

Amusing stuff, via Barry Ritholtz:

"In response to recent events Federal Reserve Board voted unanimously to authorize the Federal Reserve Bank of New York to create Yahoo Lending Facility (YLF) to avoid significant stock market disruption and to support Yahoo! Inc shares. Yahoo! Inc and its authorized agents will be able to borrow from the facility to support stock price.

This facility will be available for business on Monday, May 5. It will be in place for at least six months and may be extended as conditions warrant. The interest rate charged on the credit will be the same as the primary credit rate, or discount rate, at the Federal Reserve Bank of New York.

In addition, Yahoo! Inc shareholders who are unable to sell their shares at or above Friday, May 2 closing price, will be able to swap Yahoo! shares for the US Treasuries at the set price of $29.70 per share."

Bill Miller of Legg Mason, Yahoo's sub-performing second-largest institutional shareholder, gave an interview today to the NY Times wherein he opined on opportunities missed, etc. in the now-defunct MSFT/YHOO deal.

Some highlights, the first one of which in particular struck me:

• There was a deal to be had at $35  that he and other big shareholders supported, and he was surprised Microsoft didn't work harder to get it. We have now heard that both Yahoo's Yang and Miller were puzzled Microsoft didn't counter Yahoo's $37 position on Saturday. I think this is, far from pricing discipline, as Goldman Sachs says in a note tonight, further fuzzy and undisciplined thinking on Steve Ballmer's part.
• Miller thinks Microsoft had no choice here, and that not going forward was a big strategic blunder. Admittedly, he would say that as a major shareholder, but it's at least an arguable point -- and one with which I generally agree.
• He now expects Yahoo to do a major share buyback, and will be pissed if it doesn't.
• He does not like the idea of an AOL tie-up, and is only somewhat more fond of a limited advertising tie-up with Google. His argument: Why didn't Yahoo management do either deal before Microsoft came along? Good question, Mr. Bill.

More here.

Alan Greenspan must have been up late in the bathtub again last night. In a new Bloomberg interview he coins yet another of his colorfully empty expressions: "pale recession", to describe the current economic weakness. That one now goes on the list alongside "irrational exuberance" and, yes, "infectious greed", both of which are cutesy things the ex-Fed chief came up with (really!) while bathing.

But turning to this new one, just WTF is a "pale recession"? It sounds like a Clint Eastwood flick crossed with a Nabokov novel, which makes about as much sense as it could given that muddled genealogical line. What does it mean?

Nothing, is my guess. Clearly Greenspan is up to media tricks and the 82-year-old is going for a Googlewhack -- a short search for which there is only one Google result -- and he has almost pulled it off, as you can see below:

Am I the only one tickled that the other results, not counting his own quote, are almost all to French existentialist Albert Camus? Well, maybe that's just me.

Here is a graph of Yahoo, Microsoft, and Google from announcement of the failed deal to today. Note that only Google ended today up -- both Microsoft and Yahoo fell on the day. The latter wasn't a surprise, but the former apparently was to some people.

What a slap in the face to Microsoft CEO Steve Ballmer. He cancels the Yahoo deal and shareholders still don't see fit to get optimistic about his company. Does anyone think the market would have reacted the same way if Ballmer would have resigned?

Anyone buy the following argument at all from NYSE CEO Niederauer today in favor of keeping floor traders around, despite a predicted 15-20% decline in their numbers:

When you get into volatile periods, people want to use the floor more, they want to get experts involved, they want human judgment.

As I have said before, the people who will suffer most from no NYSE floor brokers are the TV networks. No more backdrop of people doing ... whatever the hell floor brokers doing in an age of electronic trading.

[via Reuters]

I'm nominated for best financial blog by a newspaper in "Canada". Vote early and vote often.

Not to be hawkish on oil prices, but how much worse can it get for oil in the short run? While there are lots of things that can take prices into the stratosphere over time, let's count the new-ish short-run things currently pushing prices higher:

1. The U.S. economy is stronger than expected, pushing up demand expectations
2. Goldman Sachs is out with a major report predicting a possible oil super-spike to $200
3. The U.S. and Iran are fighting about nuclear energy
4. Rebel attacks last weekend further curbed supplies from Nigeria
5. Mexico has newly seen supplies from a major fall faster than expected
6. Venezuelan production is off on strikes and Hugo Chavez has fired 20,000 oil workers
7. The U.S. summer driving season is set to begin
8. There is goofy election-year posturing in the U.S. about a gas windfall tax, and about a tax amnesty for gasoline

Of course, we still have the weak U.S. dollar, speculative fondness oil, worries about Iraq production, etc.

So, I'm not saying oil prices can't go higher from here, because they clearly can -- and there are plenty of reasons to believe they will over time --  but doesn't it seems as if the probabilities currently favor lower crude prices, at least in the short run?

Where do folks come down on the balance of probabilities?

In thinking about higher oil prices today, and in scanning an interesting related story at Institutional Investor about proxies demanding more information on public company carbon usage, I got to wondering about something:

In the same way that hedge funds are being urged toward more transparency on how much of their alpha is tied to leverage, how long will it be until companies are pushed to do the same thing with oil?

Wouldn't you like to know how carbon- (or oil-) levered your favorite stock's profits are?

If TechCrunch has this story right, it's big news. The gist: Mike is saying that a source tells them that Yahoo held a board meeting today and put Yahoo chair Bostock in charge in re-opening negotiations with Microsoft.

If true, then it's the end of Jerry Yang's time at Yahoo, not to mention one of the biggest business debacles in recent memory. If it's not true ... well, at least it's entertaining reading from those crazy kids at TechCrunch.

Either way, read the whole thing.

[Update] Kara has some good background reading on one of the Yahoo investors most likely to cause anything like this to happen: Capital Research's (currently pissed) Gordon Crawford.

Years ago
I was an angry young man
I'd pretend
That I was a billboard
Standing tall
By the side of the road
I fell in love
With a beautiful highway

- (Nothing But) Flowers, Talking Heads

Here is a fascinating moving (no pun intended) 12-month chart of monthly vehicle-miles on U.S. highways from 1983 to today. It's interesting what has happened in the last three years:

Maybe the cure for higher prices is higher prices after all.

[via FHWA]

Nice graph from my friends at Weather Trends on retail weather in March/April. As the company says in an accompanying release, March "was the coldest in 6 years, wettest in 10, snowiest in 12 and coldest Easter in 16+ years; the weather finally turned much more favorable for the first half of April".

These twinned before and after images from Myanmar are fairly jaw-dropping. They help explain the scale of this post-cyclone calamity.

[via NASA]

The folks at Bespoke Research have out a fascinating new chart comparing the oil, housing, and tech runs. You can see duration as well as percentage gain -- and the oil price bubble/run just out-did the tech bubble. It has been running longer, and it has newly climbed higher.

Quote du jour comes from Cerberus Capital head, and ex-Treasury guy, John Snow in a Bloomberg interview today:

We don't have long, deep recessions any more in the U.S., as we have internal adjustment mechanisms that cause us to get through these things quickly.

That's a keeper.

Some quick links that I had around:

• New Jersey principal gets out of auto lease by torching car (NJ.com)
• VCs Doerr and Moritz together on stage: Does anyone really care what these two think any more? (VentureBeat)
• Big growth in the in-car infotainment market -- and I want these people kept away from me on road (iSuppli)
• The NY Times finds a publicity-hungry economist willing to contorting support for gas tax rebate (NY Times)
• The U.S. is in recession, and the California budget deficit is spiraling from $9-billion to $20-billion (Milken)
• Brazilian coffee crops are booming, even if Starbucks is stumbling (Barron's)
• Jim Rogers hearts  Taiwan, China, and (temporarily) the U.S. dollar (CNBC/YouTube)
• Anyone messing with any of these CurrencyShares trusts? (Swiss Franc Trust)
• Helpful tips for Warren Buffett on improving his option-trading strategies (Andrew Clavell)
• My NPR Marketplace commentary on Microsoft/Yahoo from earlier this week (Marketplace)

Some useful gas/housing GDP sensitivity analysis from a new Milken report:

- Each 10 percent decline in housing sales correlates in an 0.8 percent decline in real GDP.
- Each $10 increase in oil price reduces real GDP by 0.2 percent.

In the tragic and destructive situation around Chile's Chaiten volcano, which is currently erupting and has caused large-scale evacuations, some of the recent satellite photos have been eye-popping. Here is one from Tuesday just as the volcano shot a new plume high in the Andean sky.

It is striking that three recent articles this week have struck the same note: The U.S., with its crumbling infrastructure and fearful politicians, looks increasingly like the third world. Airports are an embarrassment, bridges are collapsing, education is a mess, and don't even get started about healthcare, the environment, auto over-reliance, etc.

Read 'em all in their anti-American (ahem) glory:

• Who will tell the people? (Friedman/NYT)
• On the pot-holed highway to hell (Gapper/FT)
• The "creaking" U.S. airline industry (Price/BBC)

My friend Howard gives one highly personal take on the other side of this gloominess. Other thoughts?

My earlier post about the possible oil bubble seems to have touched a nerve, so here is more. The good people at Factset have out a fascinating new report on the same subject -- how energy markets are becoming awfully bubblish -- and it's worth a read in its entirety.

Here is one quick figure from the report showing how profits are growing so quickly that oil companies can't keep up by raising prices. It creates an interesting box for energy companies and is one sign of a crack in the market.

To be clear,  I see no reason why oil prices tumble materially tomorrow. Matter of fact, I'm usually two years too early on these calls -- at least I was in 1998 on dot-coms, and again in 2004 on housing markets -- but it feels, as they say, directionally correct (couldn't resist), and the vehemence of perma-petro-bulls helps (and you can be petro-skeptical and an energy bull at same time).

More seriously, I don't buy the argument that oil is a special case. Yes, oil supply is finite and yes, demand is growing, and yes, energy is the core of our modern life, but oil is also a classic complex system: Small demand perturbations, given the market's current criticality (c.f., Per Bak), could have massive implications for price. Oil is special, but it's not that special.

So, what would it to take oil prices down from here?

• A huge oil find might help, but it wouldn't likely make much difference. Too long to market, too much capital, too much uncertainty about productive size, etc.
• A brilliant technology innovation would do the deed, but you have to be truly a wild-eyed optimistic sort to buy that argument, at least in the short run.

About the only thing I can realistically imagine is a material decrease in demand, or potentially in demand growth. Oil supply and demand are currently delicately balanced at the 85-million barrels-a-day mark, and supply is growing, at least a little. A decrease in demand growth, likely caused by a regional recession in China/India/Europe, or an outright demand decrease, which could only be caused by a global recession, would do the deed.

And how likely are either of the above? At current prices, a lot more likely than they were $30-a-barrel ago.

Here is a sneak peek at some links from my weekly column over that TheStreet.com.

• Busting the non-cartel in semiconductors (Bloomberg)
• Solar industry in California is chasing madly after workers (S.F. Chronicle)
• Nuclear, tidal energy to supplement fossil fuels (Oil & Gas Journal)
• Pimco's long view take on the markets (BusinessWeek)
• Why won't people change their behavior in light of high oil rices? (Forbes.com)

Lots of Scoble-herded chatter on the interwebs about how news of last night's Sichuan quake showed up first on Twitter. Fascinating stuff.

My point of view, which I have made a number of times in recent talks, is that Twitter represents the democratization of realtime headline news. It's all realtime and all headlines -- and important (even if a nascent and messy phenomenon).

Interesting that the day RIM announces latest and greatest 3G Blackberry that Apple says iPhones are no longer available through its online store.

Just to get things going, here are the obligatory rumors:

1. Apple is going to announce 3G iPhone early.
2. Apple is having huge stock issues because of U.K. price cuts.
3. Apple is converting rare earth in iPhone to less rare earth.
4. It's all a trick to get an iPhone story on Engadget on same day as new Blackberry is announced.

I buy none of these explanations, so I'm guessing Apple is out of stock because it is out of stock near the end of the product's run.

Granted, it's nowhere near the absurdity of Nortel, which almost a decade ago was briefly more than 30% of the Toronto Stock Exchange's market capitalization, but RIMM stock is up to fun stuff. It's newly knocking up against 4% of the TSE by capitalization.

Now that OPEC is playing nice with one another, at least temporarily, there is lots of discussion about the price OPEC wants for crude oil. Everyone says that OPEC likes higher prices, to a point, with the implicit argument being that there is some price at which OPEC members make lots of money, but it still dissuades investments in alternatives.

That's true, sort of. But it misses something important. Predictable prices, even at higher levels, are easier to invest around than unpredictable prices. If you know, in some sense, that crude oil prices are going to be over $100 for some time, you can plan accordingly as an investor, entrepreneur, integrated oilco, etc.

The trouble comes when you're worried that the bottom may fall out of the market at any time. What if prices a year from now are half of what they are today? What if they "merely" fall by 25%? What does that do to your business model? To your investments? To your production?

That's why I disagree with the common wisdom that OPEC is in the predictable goose-plucking, tax business -- that of extracting the most feathers with the minimum of hissing. Instead, OPEC is in the unpredictable "black swan" business: Its optimal time series of prices is something like $100, $100, $100, $10, $100. Big, unpredictable and intermittent crude oil price decreases will do more than anything else to keep OPEC precisely where it is in the market: A wildly profitable cartel with control of a crucial commodity.

I love this quote that Felix picks from a Brad DeLong commenter in the ongoing debate about whether Harvard's endowment gains should be taxed:

Harvard is an investment bank with a mom-and-pop non-profit enterprise attached to it for tax purposes.

There is a fairly savage Harvard takedown here by Jim Manzi.

Who is right? I'm haven't spent enough time with this one yet, but I have to confess that I sidle closer to the "tax 'em" crew when it comes to private university endowments.

Interesting piece picked up by The Oil Drum on the relationship between gas prices and real estate in Australia. It summarizes a study of the effect on commuting costs when considering various communities progressively further outside the urban/suburban/exurban horizon west of Sydney.

Here is the effect in the $2/litre scenario, with red representing the highest percentage of income going to fuel consumption, etc.:

Granted, this is based on a few assumptions, not least of which being that a commuter-centric culture will continue to prevail in a high-price oil world. That is a debatable point.

Nevertheless, interesting stuff, as is the underlying paper. Can barely imagine what this would look like here in car-dependent, freeway-riddled southern California.

Fascinating MIT presentation by Fred Salvucci out about the role of chance in transportation and oil/energy markets.

The first commercial use of rail in the New World, Salvucci tells us, was to haul in granite for the Bunker Hill monument, and to bring dirt from the suburbs for Boston builders. When people realized they could use the new technology to transport farm products, the Boston & Worcester Railroad was born. But the idea of moving people around didn’t emerge until the 1800s, when the concept of living one place and working in another led to streetcars in Boston and elsewhere ...

Salvucci remarks on the numerous cases of “indirect causality” through human history, how things “built in ways that are unanticipated and probably unanticipatable.” In 1865, there were no electric street cars. By 1900, U.S. East Coast cities were covered by them. In 1900, there were 2,000 autos in the U.S., and by 1920, there were so many cars that city rail networks began dying out. Don’t be fooled into thinking you can “predict tomorrow based on yesterday plus a small delta,” warns Salvucci.

You can watch it by following this link.

Airlines are in the middle of radical service cuts. Not just increasing prices, but reducing the amount of air service to large and small cities in the U.S. It is partly because of a weakening economy, partly because of higher oil prices, and partly because of the market simply being over-supplied with airlines.

Whatever the cause, the upshot is the same: Less service in future. We all know this, or have at least heard it, but it has taken my friend Rick Seaney at FareCompare to really make it visceral to me. Because Rick has published a post detailing all the cities seeing material decreases this year in air service, as much as 40 % or more in some large cities, as well as some smaller cities losing commercial air service altogether -- the newly "can't get there from here" places.

Here are the cities in map form (thanks Greg), and you can click for a larger version: