Rory Stewart: Time to end the war in Afghanistan

Disruptive Innovations? Not So Much

Investing hat on, I spend a lot of time hearing about disruptive innovations. Disruptive this; disruptive that. Sometimes it’s wonderful things, but most times it’s neither  – that is, neither disruptive, nor particularly innovative. It’s just words.

One of the hallmarks of things that aren’t very disruptive is when you hear that “It would be huge, if only the incumbents would let it happen”. Really? Then you’re screwed. Because that’s a hallmark of a truly disruptive innovation: It makes things end badly for the incumbents, whatever their wishes on the matter might be. They’re hardly going to lie down and let it happen to them.

Comparing the Dot-Com and Not-Com Bubbles

Great graphic from Tableau comparing the Dot-Com and Not-Com bubbles: [-]

Latest Dan Loeb Love Letter

Dan Loeb of ThirdPoint writes to President Obama. He is apparently not counting on going to the White House Christmas party.

Third Point’s 2nd-Quarter 2011 Investor Letter

Where to for Oil?

Three worth-reading piece on the outlook for oil:

  • Oil: Up or Down? (Source)
  • The big bets that the debt fiasco will raise oil prices (Source)
  • Oil at $120 Becomes Biggest Energy Bet as Futures Leave Forecasters Behind (Source)

On the Blankfein Era at Goldman

Long Lloyd Blankfein of Goldman Sachs profile at NY Magazine:

Should his era be coming to a close, Blankfein will be remembered first for having seen the 142-year-old-firm through some of the most perilous months in its history. But he will also have the distinction of having allowed Goldman Sachs to become a symbol of everything wrong with banks, corporations, even capitalism itself. Over the past three years, Goldman Sachs has been accused of having its hand in innumerable sinister activities, including but not limited to being the driving force behind the collapse of AIG and the Greek economy, spurring a global food crisis, colluding with Qaddafi, hoarding the swine-flu vaccine, hogging the fryers at Shake Shack, and bamboozling its clients in order to pay out monster bonuses. Even the firm’s name has become cultural shorthand for banker greed. “If you’re going to try to convince people you care about things other than money,” Amy Poehler quipped on Saturday Night Live, “may I suggest you remove the words gold and sack from your name?”

via “It’s Too Bad. And I Don’t Mean It’s Too Bad Like ‘Screw ’Em.’”.

New Commodity Price Regime

New commodity pricing paper that’s worth a read. It predicts a new pricing regime ahead.

We believe that a crucial and under-explained shift is taking place in commodities markets that will have profound effects on corporate competitiveness. In particular, we believe that the next five years will see a significant, secular increase in prices across a range of commodities, including hydrocarbons, minerals, and food, and that this increase will have a meaningful impact on corporate strategy and operations, beyond simply adjusting to a higher cost environment.

In the last five years, the surge in commodity prices reversed more than a century of steady but almost continuous price decline. For example, 2011 prices averaged nearly 70 percent more than 2001 base prices across nearly every key commodity, bar oil (see Figure 1). For most commodities, this increase was the result of fundamental economic forces, not just secondary speculation or short-term supply/demand mismatch. This suggests that the kinds of “corrections” seen in mid-2011 are transitory and should not obscure the overall upward trend. Furthermore, we expect to see additional volatility in the next 18 months that will tempt planners to ignore or rationalize away this secular trend. Companies that accurately perceive and get ahead of this underlying trend will prosper, while those that fail to acknowledge or plan for its impact are likely to suffer.

The right perspective and time scale are essential to making sense of these changes. Most discussions of fluctuating commodity prices tend to focus on either short-term predictions of volatility or long-term conjecture about highly uncertain trends. These discussions are usually too tactical to guide strategic choice or too speculative to drive concrete action, making their conclusions not very helpful to CEOs wrestling with how to interpret these trends. As a result, we see an emerging blind spot in corporate planning for the time frame that matters most: the medium term of the next five years. This paper is for CEOs and decision-makers seeking to eliminate this blind spot and be better
prepared for the impact of this transition.

Last-place Aversion

Intriguing: People punish themselves to avoid being in last place.

“Last-place Aversion”: Evidence and Redistributive Implications

Why do low-income individuals often oppose redistribution? We hypothesize that an aversion to being in “last place” undercuts support for redistribution, with low-income individuals punishing those slightly below themselves to keep someone “beneath” them. In laboratory experiments, we find support for “last-place aversion” in the contexts of risk aversion and redistributive preferences. Participants choose gambles with the potential to move them out of last place that they reject when randomly placed in other parts of the distribution. Similarly, in money- transfer games, those randomly placed in second-to-last place are the least likely to costlessly give money to the player one rank below. Last-place aversion predicts that those earning just above the minimum wage will be most likely to oppose minimum-wage increases as they would no longer have a lower-wage group beneath them, a prediction we confirm using survey data.

via “Last-place Aversion”: Evidence and Redistributive Implications.

Twitter Digest: 2011-07-24

  • Onion: Artists Announce They’ve Found All The Beauty They Can In Urban Decay – http://onion.com/pevxC4 ->
  • BarCap: Unlikely that a last-minute U.S. debt deal will be enough for U.S. to retain AAA debt rating. ->
  • SocGen musing tonight, and I agree, that a technical default (still low prob) much worse for equities than for Treasuries. ->
  • Can I just say I don’t like the thing that has replaced Expose in OSX Lion? Well, I don’t. ->
  • Get your popcorn popping. RT @BloombergNow: Dollar Falls as U.S. Debt Ceiling Talks Break Down http://bloom.bg/qIJ1Lv ->

Congressional Competence

Give Congress credit this weekend for showing that it is less competent than you think it is, even when you consider its incompetence.