*michael parekh on IT*

ON OUR INTERESTS IN IRAQ

REAL IRAQI POLITICS

This passage from Thomas Friedman's latest op-ed on Iraq, McCain, and Obama resonated with me, in the wake of the clever Der Spiegel interview  by Iraqi Prime Minister Maliki, timed around Obama's visit to Iraq:

"“Americans are looking forward to the post-Iraq phase of U.S. politics, and Iraqis are now looking forward to the post-American phase of Iraqi politics,” said Michael Mandelbaum, a foreign policy expert at Johns Hopkins University. That is the reality of post-surge Iraq and post-subprime America — and any leader in either country who ignores that reality does so at his or her peril.

Forget about our narrative on this war — how we “liberated Iraq.” Think about the Iraqi narrative. No one likes to be liberated or occupied by someone else. It is humiliating. France still hasn’t gotten over the fact that it had to be liberated by the Allies. What is important is how, with the help of the surge, Iraqis have finally started to liberate themselves — the Sunnis from their extremists and the Shiites from their extremists."

The last bit about France not liking being liberated by the Allies reminded me of how DeGaulle swooped in to the front of the line as the Allies finally liberated Paris from the Nazis.  This Wikipedia entry reminds us (image source):

"At the liberation of France following Operation Overlord, he quickly established the authority of the Free French Forces in France, avoiding an Allied Military Government for Occupied Territories.
He flew into France from the French colony of Algeria a few days before the liberation of Paris, and drove near the front of the liberating forces into the city alongside Allied officials. De Gaulle made a famous speech emphasizing the role of France's people in her liberation.  After his return to Paris, he moved back into his office at the War Ministry, thus proclaiming continuity of the Third Republic and denying the legitimacy of the Vichy regime."

The Iraqis are going through their own set of internal politics trying to figure out their political dynamics post the American presence in Iraq.  The recent Obama/McCain romp through the region is but a convenient prop to be cannily used by Iraqi politicians for their own domestic advantage.  DeGaulle is famous for his pithy observation once that:

"France has no friends, only interests."

We need to remember Iraq, along with Prime Minister Maliki's key Shia supporting partner Iran, has no friends as well...only interests.  And they've been focused on these interests for a long time, even as the U.S. public's interest in all things Iraq wanes going into the election.

We too need to be coldly focused on our long-term interests in the region, and not let the current, short-term Presidential campaign rhetoric on either side drive those interests.

ON A BOTTOM IN BANKS?

FEAR AND GREED

Barron's continues to make contrary calls on it's cover this weekend, following last Saturday's cover story suggesting a bottom in Housing market woes.  This Saturday's cover focuses on the Banks, with a story titled:  "What to Bank On".  Here's an excerpt:

"AFTER A RECORD-SETTING RALLY LAST Wednesday, the brutal selloff in financial stocks -- the worst for any major industry group since the technology bubble burst in 2000 -- could be over.

Many financial companies face additional loan losses and credit-related write-downs in the coming quarters, particularly if the economy stays weak into 2009. Yet a slew of earnings reports last week from marquee banks like Wells Fargo and JPMorgan Chase suggests that most financial companies have sufficient earning power to offset a rising tide of bad loans and should be able to absorb further write-downs without having to seek significant amounts of additional capital.

Financial stocks in the Standard & Poor's 500 index are down 29% this year and off 43% in the past 12 months, even after a record-setting 13% gain Wednesday and a 6% rise Thursday. The group was up slightly Friday. Financials are the worst-performing group this year in the S&P, which is off 14%. And they've risen just 10% since the most recent bull market began in October 2002, against a 62% advance by the index. Financials are down to 14% of the S&P 500 from a high of 23% in late 2006 as more than $1 trillion of market value has vaporized, in part because of huge declines in such former mega-stocks as Citigroup (ticker: C) and American International Group (AIG).

U.S. financial stocks beckon because nearly every major company now trades for under 10 times projected 2009 profits. Though there is considerable uncertainty about '09 profits, considering the tough economic outlook, what is comforting is that many financials combine low forward P/Es with and low ratios of price-to-book value, derived by subtracting liabilities from assets and dividing by the company's outstanding shares. It historically has proven profitable to snap up major financials around book value because purchasers effectively are getting the ongoing businesses for nothing."

It's always tough to make a bullish case on anything in the throes of a raging bear market.  Fear gets overdone just as fiercely as greed does, especially where markets are concerned.  The Barron's article, regardless of one's view on this issue on going forward, is a solid, college try.

ON CHINA'S ARCHITECTURAL RENAISSANCE

NEXT IN LINE

A few days ago I posted about a unique building going up in Beijing, the new CCTV tower designed by Rem Koolhas, with critical praise by Paul Goldberger in the New Yorker. 

Today, the New York Times has a feature piece on the architectural renaissance going on all across China, lead in many cases by prominent architects from around the world.  The piece also has a great picture of the Koolhas building in the context of the Beijing landscape around it (featured here). 

The piece starts with a powerful introduction:

"If Westerners feel dazed and confused upon exiting the plane at the new international airport terminal here, it’s understandable. It’s not just the grandeur of the space. It’s the inescapable feeling that you’re passing through a portal to another world, one whose fierce embrace of change has left Western nations in the dust.

The sensation is comparable to the epiphany that Adolf Loos, the Viennese architect, experienced when he stepped off a steamship in New York Harbor more than a century ago. He had crossed a threshold into the future; Europe, he realized, was now culturally obsolete.

Designed by Norman Foster, Beijing’s glittering air terminal is joined by a remarkable list of other new monuments here: Paul Andreu’s egg-shaped National Theater; Herzog & de Meuron’s National Stadium, known as the bird’s nest; PTW’s National Aquatics Center, with its pillowy translucent exterior; and Rem Koolhaas’s headquarters for the CCTV television authority, whose slanting, interconnected forms are among the most imaginative architectural feats in recent memory."

But the piece also offers the negative side of these dramatic architectural changes:

"Yet your sense of marvel at China’s transformation is easily deflated on the drive from the airport. A banal landscape of ugly new towers flanks both sides. Many of those towers are sealed off in gated compounds, a reflection of the widening disparity between affluent and poor. Although most of them were built in the run-up to the Olympics, the poor quality of construction makes them look decrepit and decades old.

It’s the flip side of China’s Modernist embrace: tabula rasa planning of the sort that also tainted the Modernist movement in Europe and the United States in the postwar years. China’s architectural experiment thus brims with both promise and misery. Everything, it seems, is possible here, from utopian triumphs of the imagination to soul-sapping expressions of a disregard for individual lives."

What struck me about these two paragraphs, is that one could probably have made the same societal observations about New York and London when they were going through their early periods of dramatic architectural changes,  a hundred and two hundred years ago respectively, driven of course by the dramatic economic growth of the nations they represented. 

The difference this time with what's going on in China is likely the scale and the pace, spread out across so many cities across China each with burgeoning millions in population.

But China is going through a time-honored phase of fast developing global nations.  The architectural "monuments" are merely a way to keep score in the cycle.

ON A DIFFERENT SPIN ON HOME PRICES

EYE OF THE STORM

This week ended with a seemingly endless torrent of bad financial news sharply knocking the financial markets around.  And by all indications it'll be more of the same next week, as the financial markets decide what to make of the turmoil in housing stalwarts Fannie Mae and Freddie Mac, with a back-drop of ever-rising oil prices. 
So it was startling to see this cover story in Barron's this Saturday, titled "Bottoms'-Up:  This real-estate rout may be short-lived".  Kind of like spying a teeny bit of sun in the darkest of rain-storms.  Here's a piece of their argument:

"Home prices are down nearly 18% from the market's peak, according to Case-Shiller, and inventories of unsold homes are at near-record levels. Foreclosures are mushrooming on "subprime" properties, or homes whose purchase was financed with subprime debt. Blowback from the crisis has left mortgage-finance giants Fannie Mae (ticker: FNM) and Freddie Mac

(FRE) financially strapped, while many other lenders lack the stomach -- or money -- to offer new mortgages. Noted market experts such as Pimco bond-fund manager Bill Gross and economist Mark Zandi of Moody's Economy.com predict the meltdown in housing will continue for many months, with home prices declining by 10% or more from today's depressed levels.

Yet, such pessimism appears overdone, based on much recent data. Sales of existing homes are showing tentative signs of increasing, while the plunge in prices likely is nearing an end. Total inventories fell in May to 4.49 million existing homes for sale, or a 10.8-month supply at the current sales pace, down from an 11.2-month supply in April, according to the National Association of Realtors, in just one statistic emblematic of the nascent trend.

YES, THE SUPPLY OVERHANG still is humongous, but at least the numbers are moving in the right direction..."
Still other numbers suggest prices are close to bottoming. The S&P/Case-Shiller Index for April, released just last month, showed the biggest year-over-year price decline yet, of 15.3%. Buried in the numbers, however, and widely ignored in the media, was the news that home prices actually rose, albeit slightly, between March and April, in eight of the 20 markets covered by the index (Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Portland, Ore., and Seattle). This was in sharp contrast to the readings for March, which showed prices falling in 18 of the 20 surveyed markets. Also, the pace of monthly price declines is starting to slow in most of the markets with negative readings."

The piece goes on to cover a whole lot of reasons why the broader real estate market back-drop is still bad, and doesn't get carried away with the bullish case.  But the very attempt to go through some reasons that not all the news is bad, is notable in a period where the successful trade has been in one-direction, down. 
We now go back to our regularly scheduled torrent of relentlessly bad economic news.

ON DUBAI'S NEXT TOPPER

LIQUID DREAMS

Dubai continues on it's quest of building over-the-top stuff, with the world's largest fountain now on it's agenda.  Gizmodo reports:

"In Dubai, they're doing things big these days. Big hotels, big palm tree islands, big wallets, and very soon, big $281 million fountains. The biggest one in the world, in fact, and it will be large enough to give the famed fountains at the Bellagio in Las Vegas an inferiority complex.

At 825 feet long, the unnamed fountain will be 25% larger than the Bellagio fountain.

Powering the fountain will be pumps capable of shooting columns of water approximately 450 or so feet into the dry Middle Eastern air.

A light and sound show produced by a network of 6,600 lights and 50 projectors will illuminate the burgeoning Dubai skyline at night.

About 22,000 gallons of water are expected to cycle through the fountain at any given time when it is completed in 2009... [Luxury Launches]

Now George Clooney's Ocean's Eleven crew have another location they can film the ending of Ocean's 14 or 15, or whatever they're up to...I've lost track.

ON UNIQUE ARCHITECTURE IN BEIJING

BOXY PRETZEL

It's refreshing to see that not every major city in a fast, growing, developing country is racing to build the tallest skyscrapers around. 

There's a unique form of skyscraper going up in Beijing that will be re-defining how we think of skyscrapers.  This New Yorker piece by Architect critic Paul Goldberger explains:

"(Ole) Scheeren is the co-architect, with Rem Koolhaas, of the most eagerly awaited building in Beijing, the headquarters of the Chinese television network CCTV, a monumental construction that has become world-famous long in advance of its completion, scheduled for late this year.

A vast structure of steel and glass, it is a dazzling reinvention of the skyscraper, using size not to dominate but to embrace the viewer.

The building will contain more office space than any other building in China and nearly as much as the Pentagon, but, as skyscrapers go, it is on the short side, with just fifty-one floors.

Looking from a distance like a gigantic arch, it is a continuous loop, a kind of square doughnut."

Or a boxy pretzel...pick your snack food.

Mr. Goldberger goes on to say:

"When you get closer, you see that each horizontal section is made up of two pieces that converge in a right angle. The top section, thirteen stories deep, is dramatically cantilevered out over open space, five hundred and thirty feet in the air, and it seems to reach over you like a benign robot.

The novelty of the form—some Beijingers have taken to calling it Big Shorts—takes time to comprehend; the building seems to change as you pass it. “It comes across sometimes as big and sometimes as small, and from some angles it is strong and from others weak,” Scheeren said. “It no longer portrays a single image.”

This gentle giant of a structure, when finished, will have about 4.1 million square feet of office space, a little more than the Empire State Building (2.8 million sq. ft.) and Chrysler Building (1.2 million sq. ft.) combined.

They're racing to finish it in time for the Summer Olympics in Beijing, which kick off in less than 40 days.  It's definitely going up on my list "must visit" places, on the next trip to China.

ON JUDGING BITS AND ATOMS

LOCATION, LOCATION, LOCATION

This Reuters article highlights how difficult it is being a shopper of analog goods in terms of trying to discern quality from where things are made:

"These days, many fashionistas are still confused over what is real, what is fake, and whether a product's country of origin says anything about its quality.

Even a "made in Italy" label no longer guarantees that a bag or a pair of shoes was hand crafted by artisans in a Tuscan workshop.

Instead, the bag could have been stitched together by illegal workers in clandestine Italian factories, and the shoes assembled from plastic soles and leather shipped in from China."

The piece goes on to describe how the perception of quality differs depending on not just where a product is made, but where a buyer is coming from:

"Asian shoppers are particularly origin-conscious as French and Italian luxury goods are important status symbols in the newly affluent region. And the opinions of Asian shoppers are beginning to matter more and more as growth in more mature markets slows down.

"In Asia, in a certain segment, you can't offer a product made in China or made in Asia," said Patrizio di Marco, president and chief executive of Bottega Veneta, on the sidelines of a luxury goods conference in Tokyo."

What's funny is how perceptions are blurring in the realm of digital goods as well.  The example that comes to mind are the area codes for phone numbers, be they old-fashion land-lines, cellular lines, or internet phone (VOIP) lines. 

In a world where almost everyone has a cell phone, and the geographical location of the phone no longer matters, the area code on the phone still does.

My 917 cell phone number from New York, which is my primary number, almost always causes a double take in stores and restaurants around the country.

It's one of the reasons why vendors of internet phone numbers like Vonage, Skype, Yahoo! et al, do a thriving business in offering the area codes of your choice.  With these numbers you can be "local" to all the people that matter to you whether it's business or personal.  You can be all things to all people, for a small fee per year.

My wife was extremely chuffed last year, when she won the area code lottery while activating her new iPhone with AT&T, and getting a 212 number for a CELL-PHONE.  I of course felt gypped a few minutes later by the same phone company with my prosaic 646 assignation for my new iPhone.

It's reminiscent of the famous Seinfeld episode, "The Maid", where the status of a New Yorker was, and is still judged by whether the seven digit phone number is preceded by a 212.

I guess geography does matter, regardless of whether it's bits or atoms.  And it will for some time to come, regardless of how much technology blurs our land lives.

ON OUR OFFSHORE DRILLING PHOBIA

GET ON WITH IT

There's something good that comes out of almost every crisis, and that is true even of the Oil price crisis of 2008.  Case in point is the crack, however small, in the multi-decade, bipartisan stand by U.S. politicians against offshore drilling.   This New York Times article today makes the point with a bit of drama:

"Gov. Charlie Crist stepped on the third rail of Florida politics this week when he abandoned his opposition to drilling offshore for oil and natural gas. But surprise, surprise, he did not die.

His call for cautious reconsideration, in fact, is  spreading.

In the Capitol and along the coast here minds once closed to offshore drilling have been cracked open by the prospects of safer drilling technology and an awareness that dependency on foreign oil has heavy costs."

Never mind that it's primarily the Republicans for now moving cautiously in this direction, with both President Bush and Presidential hopeful John McCain publicly speaking out for re-thinking the 27-year old U.S. ban on drilling offshore between three and 200 miles off our shores.

Never mind that our neighbors in the Americas, like Canada up north, and so many countries down south have been aggressively drilling offshore for a long time with no major environmental issues.  In fact Brazil recently won THE global oil reserves lottery recently, with the biggest oil discoveries in 30 years anywhere in the world, just about 200 miles from it's shores.

Even Cuba is busy drilling offshore with a little help from the Chinese, just 90 miles off our shores.  Given that oil reserves under land or under sea-beds don't recognize national borders, it wouldn't be surprising if the Cubans were straw-sipping some oil that could be drilled from our side of the offshore border.

Mexico is already competing offshore with us on this "drinking straw effect".

In fact, European countries in Scandinavia and norther Europe have been deep-water drilling for a long time, yet satisfying some of the most vigilant environmental constituencies in the world.

We've been playing offshore with one-hand tied behind our back for a long time:

"Congress first adopted its moratorium against drilling on the outer continental shelf, 3 to 200 miles offshore, in 1981. In 1990, Mr. Bush’s father signed an executive order reinforcing the ban; Mr. Bush promised Wednesday to rescind the order if Congress ended its moratorium."

Oil prices in 1981 were in the mid $30 per barrel range, with of course a very different global demand picture.

What's at the root of our national objection to offshore drilling? This NY Times article offers an answer:

"The primary concern about offshore drilling has been that unsightly oil rigs would dampen tourism, or that spills would threaten the environment. Advocates, and even critics, say new technology has greatly reduced the risk of spills."

Ironically, these are amongst the same arguments (aesthetics and environmental factors), against deploying wind and solar power infrastructure both offshore and on land.  So much for alternative energy sources.

One of the most bullish things on the global offshore drilling front, is how things are about to change in terms of drilling capacity over the next 3-5 years.  Again, an excellent New York Times piece yesterday provides a lot of good detail:

"In recent years, this global shortage of drill-ships has created a critical bottleneck, frustrating energy company executives and constraining their ability to exploit known reserves or find new ones..."

“The crunch on rigs is everywhere,” said Alberto Guimaraes, a senior executive at Petrobras, the Brazilian oil company that has discovered some of the most promising offshore oil but has been unable to get at it.

“Almost 100 percent of the oil companies are constrained in their investment program because there is no rig available,” he said.

As a result, drilling costs for some of the newest deepwater rigs in the Gulf of Mexico — the nation’s top source of domestic oil and natural gas supplies — have reached about $600,000 a day, compared with $150,000 a day in 2002."

But here's the good news:

"These record prices have spurred a new wave of drill-ship construction. This boom could lead to renewed offshore oil exploration that would eventually bring more supplies to the oil market, and push down prices.

Already, 16 new drill-ships are scheduled to be delivered to oil companies this year — more than double the number delivered over the last six years combined. In fact, 75 ultra-deepwater rigs should be delivered from 2008 to 2011, according to ODS-Petrodata, a firm that tracks drilling rigs.

Shipyards from South Korea to Norway are working overtime to meet a huge influx of orders."

Remember these ships aren't being order hoping to find oil offshore, but to extract lots of oil that's already been found offshore around the world, that's now profitable to get at these record prices.

Also remember that energy is a cyclical industry, notwithstanding the secular demand curves oil analysts like to point to from countries like China and India.  Again, the article above reminds us of the last big surge in demand for onshore drilling rigs:

"The last such boom in orders came in the late 1970s and early 1980s, when exploration rose after the 1970s oil shocks. In the 1990s, low oil prices and overflowing oil supplies led oil companies to cut back on exploration drastically."

I remember that boom and bust cycle vividly from my time on Wall Street and the Middle East.  History almost always repeats itself. 

But for now, things are moving slowly in the right direction for consumers.  And we need to nudge our politicians along, regardless of partisan lines.  And not let them hide behind promises of focusing on alternative energy sources. 

It's not an either/or proposition.  We need to be doing it all, wind, solar, bio-fuels, nuclear, clean coal, and good-old fashioned fossil fuels, wherever we can get our hands on it.  And of course do it as safely and ecologically sensitively as possible.  But the more expensive alternatives on all these fronts will only pursued by the markets when prices are high. 

None of it is going to happen very quickly, regardless of the choices we make, and no, it won't make an immediate dent in oil prices that would make us all happy.  But turning this ship around will take a lot of time (pardon the pun).  So we need to get on with it, balancing pragmatism and our ideal wishes.

That time is now, with as few political impediments as possible.  And hopefully be ahead of the long-term cycle for a change.

ON A SMALL STEP FORWARD FOR U.S. BROADBAND

SPOT OF SUN-LIGHT

Broadband consumers in the U.S., have had a spate of bad news, both on the wired and wireless fronts in the past year.  If you haven't been keeping track, let me count some of the ways:

1. Our world rank in the provision of broadband relative to the price paid, has slipped to the mid-teens in recent years.
2. The wired and wireless broadband providers are experimenting with putting caps on the amount of bandwidth consumed by their customers at given price points.  In fact, most of the wireless broadband providers like Verizon, AT&T, Sprint et al, have already started to put on caps to their "unlimited" data plans.
3. The wired broadband providers have been implementing technologies in their networks to throttle down high-bandwidth applications like P2P (peer-to-peer) video services.
4. The broadband providers continue to aggressively use their hefty lobbying capabilities with Beltway regulators on the network neutrality front.
5. On the wireless front, efforts to provide municipal Wifi services across the country have been scaled back for a wide variety of reasons.
6. Also on the wireless front, the widespread deployment of next generation Wimax wireless technologies by providers like Sprint, have also seen setbacks.
7. Recent signs that carriers like Verizon, which won the recent wireless spectrum auction, maybe backing away from some of the open access conditions of those auctions.

So it was good to see a minor bit of good news on the wired broadband front today, from none other than Verizon on it's FIOS fiber broadband roll-out across the country.  Here's an excerpt from DSLReports:

Verizon...has now expanded their 50Mbps/20Mbps FiOS tier into their entire footprint.
The company will also be expanding their symmetrical 20Mbps tier, previously only available in some States, to all of their users starting next week. The push is likely a pre-emptive strike against cable competitors like Comcast, who've only just begun deploying faster DOCSIS 3.0 speeds.
The 50/20 Mbps service will be available in New York and Virginia for $89.95, and in other States for $139.95 a month with an annual service plan. The 20/20 Mbps FiOS tier is available in all FiOS markets for $64.99 a month with an annual service plan (press release here, forum discussion here)."

It's not cheap, but it's increased competition for the cable broadband providers, and that's a good thing.  Verizon's FIOS service has been a multi-billion investment initiative that has been the one small bright spot in the rolling out of relatively affordable, true broadband services in the U.S. 

Not clear from the initial reports if FIOS has any bandwidth caps associated with the various pricing tiers.

We need a lot more  competition from a host of other providers, but this is a small step in the right direction.

ON POLITICAL STRESS IN EMERGING MARKETS

A TAPESTRY OF SUBSIDIES

Thomas Friedman starkly highlights a key problem for fast-growing emerging markets in this latest missive from Egypt:

"The current global energy-food crisis is, understandably, a pocketbook issue in America. But when you come to Egypt, you see how, in a society where so many more people live close to the edge, food and fuel prices could become enormously destabilizing. If these prices keep soaring, food and fuel could reshape politics around the developing world as much as nationalism or Communism did in their days..."
A few years ago, Egypt’s president, Hosni Mubarak, belatedly but clearly embarked on an economic reform path that has produced 7 percent annual growth in the last three years — and now all that growth is being devoured by food and fuel price increases, like a plague of locusts eating through the Nile Delta..."
For Egypt’s poor, who make up 40 percent of the population, food makes up 60 percent of their household budget. When wheat prices double, because more U.S. farmers plant corn for biofuels, it is devastating for Egyptians, who depend on imported American wheat for their pita bread. Bread riots are now a daily occurrence here."

Keep in mind the subsidies mentioned above in passing for corn farming in the US for biofuels.

The basic problem is the deal the Egyptian government made with the really poor majority, across the country years ago:

"What’s happening is that the basic bargain between the Egyptian regime and its people — which said, “We will guarantee you cheap food, a job, education and health care, and you will stay out of politics” — is fraying. Even with the growth of the last three years, government subsidies and wages can’t keep up with today’s food and fuel price rises. The only part of the bargain that’s left is: “and you will stay out of politics.”

The key  issue here of course are the government subsidies for basic staples, from food to fuel.  Egypt again is a case in point:

"From Shubra we drive into the desert toward Alexandria. The highway is full of cars. How can all these Egyptians afford to be driving, I wonder? Answer: The government will spend almost $11 billion this year to subsidize gasoline and cooking fuel; gas here is only about $1.30 a gallon."

The reason these subsidies are important to note is not it's prevalence in Egypt, but in almost every developing country from Venezuela to Iran to Indonesia.  Not to mention reverse subsidies like the taxes on gas all across the developed economies in Europe.

If gas and energy prices remain high for a few years, the political repercussions in a whole host of countries in almost every major continent could be really unpredictable in the short-term. 

We especially need to be paying attention as subsidies in one place almost always have political and economic impact on subsidies in another. 

Traditionally, politicians have not needed to pay attention to these cross-border repercussions in a globalized world.  Now the global tapestry of subsidies matters more than ever.  And there's almost no upside for politicians in either the developed or developing world to really be bothered about the political and economic costs in another.

Political stress due to subsidies in both developed or developing economies is nothing new.  That they can lead to political changes in both worlds is also not new or unexpected.  What's new here is that the political stress in some of these emerging markets could result in not just political change, but potentially violent political change.

As global investors celebrate the relative fast long-term growth of many emerging markets, and even as that growth is good for so many people in those countries, it is still tiered growth, from China to India to Russia to Brazil.  It depends on all the tiers moving up the economic ladder more or less concurrently and consistently.

As Friedman notes in his piece from Cairo:

"The good news: More Egyptians today can afford to live like Americans. The bad news: Even more Egyptians can’t even afford to live like Egyptians anymore. This is not good — not for them, not for us."

The laws of unintended consequences are at work again.  Especially when Americans are striving to live like Americans.

ON THE CONTEXT AROUND $200/BBL OIL

STICKER SHOCK

Barron's has an interview with one of the leading Oil industry analysts, Arjun Murti of Goldman Sachs (my former firm), that is worth reading, given the notable $10 jump in oil prices on Friday, nudging $140/barrel:

"IN 2004, ARJUN N. MURTI, A TOP ENERGY ANALYST AT GOLDMAN SACHS, published a report predicting "a potentially large upward spike in crude oil, natural gas and refining margins at some point this decade." It was a controversial call, with crude around $40 a barrel at the time. But it was right on the money.

Four years later, crude is trading around 139.

Murti sees energy in the later stages of a "super spike," in which prices rise to a point where demand drops off. In a note last month, he wrote that "the possibility of $150-to-$200-per-barrel oil seems increasingly likely over the next six to 24 months."

Some notable excerpts:

"(Q) Longer-term, what's driving crude to such high levels?

(A) Spare capacity throughout the energy complex seems very limited, whether for OPEC crude oil, natural gas or refining. In all of those areas, capacity is limited. And it's getting very difficult for companies and countries to boost supply -- something that became increasingly apparent to us over the first half of this decade..."

(Q) In terms of your super-spike scenario, what phase are we in?

(A) We are getting closer to the end game here, where despite eight years of rising energy prices, supply looks like it is going to barely grow this year. We have been bullish, but we didn't expect such a slow growth rate of supply. And demand outside the U.S., Europe and Japan has been more resilient than we expected."

I particularly think the way Arjun articulates his long-term view on oil prices is worth noting, especially since the mainstream media tends only to focus on the "super-spike" tops of his forecasts like $100 a few years ago, to $200 today:

"(Q) Do you see a sustained drop in demand at $200 a barrel?

(A) That is the big question. We have always assumed that, at some point, you get a sustained drop in demand. Our long-term oil forecast looking out 20 years is [for crude] to fall back to $75 a barrel, or some lower number. The questions are: How long do prices stay high? How sharply do they rise? And do people truly change their behavior or are they just temporarily driving less? It's an unknown at this point..."

"(Q) As for the possibility of $200 oil, that's not sustainable in your view, right?

(A) No, we call it a spike, which implies an upside and a downside. So we don't talk about a sustainable price of $200. We call it a peak price, but we don't know what that is. We've got a range of $150 to $200."

The whole interview is well worth reading, with a good overview of the short and long-term fundamentals.

ON SOME FRENCH APPLES

TOUR DE FORCE

I knew I had to write about this just because of the picture.  I'm talking about Apple's plans to open an Apple store at the Louvre in Paris, France of course.  Gizmodo explains:

"The Gioconda will be surrounded by fanboys with white earbuds soon, as Apple gets ready to open an Apple Store in the Louvre following the official approval of the project.

Like the Regent Street store in London or the Fifth Avenue store in NYC, the Louvre store will be located in one of the busiest tourism spots in the planet, with 8.3 million visitors each year.

"We are delighted that our project of opening a store at the Carrousel du Louvre was approved by the CDEC. Our stores have an enormous success in the United States, the United Kingdom, and Italy."

According to French site Nanoblog, the Louvre Apple Store will use 7,696-square-feet on two floors, using the space that was previously occupied by Résonnance and Lalique. [Nanoblog via Textually]"

Got to love how Apple makes a tourist attraction out of a retail store, and puts it at one of the biggest tourist attractions in the world. 

ON SOME UNIQUE OBAMA SUPPORTERS

FOR THE RECORD BOOKS

After last night's historic win by Barack Obama in the Democratic primary for President, it's only appropriate to remember that the candidate has supporters around the world. 

Especially in Obama, Japan, which one would would presume, was ecstatic upon hearing the results overnight.  Here's how crazy some citizens from Obama, Japan were over the candidate, a few weeks ago, in this CNN report:

Their enthusiasm is infectious, to say the least.

Congratulations, Senator Obama, on a primary race well-fought and won.

Disclosure:  I remain a McCain supporter.

ON STAR TREK MUSICAL "MALARKEY"

REMEMBERING

Like millions around the world, I've been a life-long fan of all things Star Trek ever since the original series launched on TV in the 1960s.  So this sad weekend development deserves to be noted and remembered in my book.  Here's the headline item from CNN.com:

"LOS ANGELES, California (AP) -- Alexander "Sandy" Courage, an Emmy-winning and Academy Award-nominated arranEdit Post | Post | *michael parekh on IT* | Your Weblogs | TypePadger, orchestrator and composer who created the otherworldly theme for the classic "Star Trek" TV show, has died. He was 88."

Don't remember the original Star Trek music theme?  Let me help you with this one minute clip from YouTube:

Now Mr. Courage obviously accomplished a great deal more in his life than just this iconic theme that went onto the be the basis of every Star Trek music piece over the last four decades.  But this piece of course is what he'll be most remembered for in the mainstream consciousness.

Of course, how the piece got developed is an interesting story in itself.  Here's an account from the Washington Post:

"His fanfare-style introduction to "Star Trek," eight notes played by the brass section, followed by the wordless melody with a prominent soprano voice won him enduring recognition among generations of "Trekkies" and even casual viewers of the science fiction show.

"Star Trek" originally aired on NBC from 1966 to 1969 and has been in perennial syndication.

He told an interviewer that he never was a science-fiction fan. "I think it's just marvelous malarkey," he said. "So you write some marvelous malarkey music that goes with it."

Apparently, the show's creator, the legendary Gene Roddenberry, didn't want any modern electronic music.  So Mr. Courage had to look elsewhere for inspiration.

"To write the "Star Trek" theme, Mr. Courage thought back to a pop song from his childhood that conjured images of going into the far distance. He came up with "Beyond the Blue Horizon," popularized by Jeanette MacDonald, and featuring a fast, train-like rhythm pulsating beneath the soaring melody.

Mr. Courage adapted the idea to the "Star Trek" job, which he completed in a week. His vision of the music included a soprano singer (Loulie Jean Norman), a flute, an organ and maybe a vibraphone. But he said the show's producer, Gene Roddenberry, wanted to accentuate the female voice. When Roddenberry was done, he said, the music "sounded like a soprano solo."

And like most great show biz stories, there's an interesting twist about money, as the Washington Post piece goes on to explain:

"Burlingame, author of "TV's Biggest Hits," said Roddenberry went further to annoy Mr. Courage by adding words to the instrumental theme. The lyrics begin: "Beyond the rim of the star-light/My love is wand'ring in star flight."

"It was horrible," Burlingame said. "Courage was never consulted, but Roddenbury from that point on was entitled to take 50 percent of royalties. . . . This upset Courage, understandably, not that he wrote a lyric, but that he wrote a lousy lyric that would never be sung anywhere."

Exploiting that loop-hole, Gene Roddenberry managed to get a 50% discount on the theme for a long, long time.  Given that this is the music business, it's not anywhere that others have not gone before.

ON DRAWING NEW CLOUDS

DATA HEAVENS

The bucolic image below is not an deserted international airport, but a humming internet data center in Iceland.  As this Economist article titled "Down on the server farm" explains, trends in internet computing have made the prosaic question of where to situate one's data center an increasingly strategic one:

"Data centres are essential to nearly every industry and have become as vital to the functioning of society as power stations are. Lately, centres have been springing up in unexpected places: in old missile bunkers, in former shopping malls—even in Iceland.

"America alone has more than 7,000 data centres, according to IDC, a market-research firm. And each is housing ever more servers, the powerful computers that crunch and dish up data. In America the number of servers is expected to grow to 15.8m by 2010—three times as many as a decade earlier."

The piece goes onto to provide a mainstream account of the history of internet data centers to date:

"Until a few years ago, the location of servers was an afterthought, says Jonathan Koomey, a consulting professor of environmental engineering at Stanford University. Most sat in cupboards or under desks. The computers in corporate data centres were often housed in the firm's basement. And dedicated “server farms”, which came of age during the dotcom bubble and often housed the machines of internet start-ups, were mostly built in Silicon Valley and other high-tech hubs.

The geography of the cloud

Now this haphazard landscape is becoming more centralised. Companies have been packing ever more machines into data centres, both to increase their computing capacity and to comply with new data-retention rules.

As space gets tight and energy costs climb, many firms have begun consolidating and simplifying their computing infrastructure. Hewlett-Packard, the world's biggest computer-maker, for instance, is replacing its 85 data centres across the world with just six in America.

Internet firms, meanwhile, need ever larger amounts of computing power. Google is said to operate a global network of about three dozen data centres with, according to some estimates, more than 1m servers. To catch up, Microsoft is investing billions of dollars and adding up to 20,000 servers a month."

As one might imagine, competition is increasing amongst various localities in many countries, to attract these new-fangled data centers.  They're exciting new economic drivers for so many out of the way governments.  The Economist piece notes:

"Yet it will not just be market economics that determines the shape of the clouds. Local governments give tax breaks in the hope that the presence of big data centres will attract other businesses (the computing plants themselves usually employ only a few dozen people)."

The picture of these new internet clouds should be even more unrecognizable in another decade, just as today's data centers are so different than the ones of just a decade ago. 

There may be even bus tours to these critical and out of the way data centers, like the ones we have now to Hoover Dam.

ON PONDERING GOOGLE SEARCH

STOP TO SMELL A ROSE

Use something several times a day, everyday for half a decade or more, and you can't but help take it a bit for granted.  I'm talking here about Google Search, which so many of us have become so addicted to in living our daily lives.

For that reason alone, it's interesting to note this blog post by Udi Manber, who leads Search Quality at Google, as their VP of Engineering, re-introducing us all to what Google Search is all about, and how it works behind the scenes.  That it works at all is a wonder, considering the scope of the task at hand:

"A few hundreds of millions of times a day people will ask Google questions, and within a fraction of a second Google needs to decide which among the billions of pages on the web to show them -- and in what order."

Peel that simple idea back to see the scope of the problems being solved, all revolving around core ranking, and it becomes even more amazing that it can be done at all:

"Ranking is hard, much harder than most people realize. One reason for this is that languages are inherently ambiguous, and documents do not follow any set of rules. There are really no standards for how to convey information, so we need to be able to understand all web pages, written by anyone, for any reason.
And that's just half of the problem. We also need to understand the queries people pose, which are on average fewer than three words, and map them to our understanding of all documents. Not to mention that different people have different needs. And we have to do all of that in a few milliseconds."

And of course do it in so many languages.  It also needs to be done with a bit of secrecy, as Udi goes on to explain:

"For something that is used so often by so many people, surprisingly little is known about ranking at Google. This is entirely our fault, and it is by design. We are, to be honest, quite secretive about what we do. There are two reasons for it: competition and abuse."

He goes onto talk about the constant battles Google fights with web-spam.

The whole piece is worth reading, if only to step back for a few minutes, and remind ourselves how much life has changed in the last decade and a half for us all.  A whole host of innovations, and entrepreneurial companies have brought us to this point.  And some of them have even figured out  how to make a little  profit  while providing  a "free" global service.

Google, like Yahoo! and so many others long before it, is but one of so many companies that'll continue to perform seeming miracles in the services they provide to billions around the world.  Yes, today's accomplishments will pale in comparison with what tomorrow will bring, but it's nice to pause just for a post, and remember how far we've come.

ON THE FIGHTS OF OUR FATHERS

UNTHINKING SUPPORT

This op-ed by Jeffrey Goldberg in the New York Times over the weekend, titled "Israel's 'America' Problem" makes a subtle point about the the choices facing Israel over the long-term vis a vis it's Arab and Palestinian citizens and neighbors, especially as it celebrates it's 60th birthday as a nation:

"WHEN the prime minister of Israel, Ehud Olmert, arrived at a Jerusalem ballroom in February to address the grandees of the Conference of Presidents of Major American Jewish Organizations (a redundancy, since there are no minor American Jewish organizations), he was pugnacious, as is customary, but he was also surprisingly defensive, and not because of his relentlessly compounding legal worries.

He knew that scattered about the audience were Jewish leaders who considered him hopelessly spongy — and very nearly traitorous — on an issue they believed to be of cosmological importance: the sanctity of a “united” Jerusalem, under the sole sovereignty of Israel.

These Jewish leaders, who live in Chicago and New York and behind the gates of Boca Raton country clubs, loathe the idea that Mr. Olmert, or a prime minister yet elected, might one day cede the Arab neighborhoods of East Jerusalem to the latent state of Palestine. These are neighborhoods — places like Sur Baher, Beit Hanina and Abu Dis — that the Conference of Presidents could not find with a forked stick and Ari Ben Canaan as a guide.

And yet many Jewish leaders believe that an Israeli compromise on the boundaries of greater Jerusalem — or on nearly any other point of disagreement — is an axiomatic invitation to catastrophe..."

"When I spoke to Mr. Olmert a few days after his meeting with the Conference of Presidents, he made only brief mention of his Diaspora antagonists; he said that certain American Jews he would not name have been “investing a lot of money trying to overthrow the government of Israel.”

But he was expansive, and persuasive, on the Zionist need for a Palestinian state. Without a Palestine — a viable, territorially contiguous Palestine — Arabs under Israeli control will, in the not-distant future, outnumber the country’s Jews."

Here's where the piece really grabbed my attention, quoting Prime Minister Olmert:

"“We now have the Palestinians running an Algeria-style campaign against Israel, but what I fear is that they will try to run a South Africa-type campaign against us,” he said. If this happens, and worldwide sanctions are imposed as they were against the white-minority government, “the state of Israel is finished,” Mr. Olmert said in an earlier interview.

This is why he, and his mentor, former Prime Minister Ariel Sharon, turned so fiercely against the Jewish settlement movement, which has entangled Israel unnecessarily in the lives of West Bank Palestinians. Once, men like Mr. Sharon and Mr. Olmert saw the settlers as the vanguards of Zionism; today, the settlements are seen, properly, as the forerunner of a binational state. In other words, as the end of Israel as a Jewish-majority democracy."

It was followed with this logical question and possible answer:

"So why won’t American leaders push Israel publicly? Or, more to the point, why do presidential candidates dance so delicately around this question?

The answer is obvious: The leadership of the organized American Jewish community has allowed the partisans of settlement to conflate support for the colonization of the West Bank with support for Israel itself. John J. Mearsheimer and Stephen M. Walt, in their polemical work “The Israel Lobby,” have it wrong: They argue, unpersuasively, that American support for Israel hurts America. It doesn’t. But unthinking American support does hurt Israel."

Key phrase here: "Unthinking American support".  Applicable to so many issues, both foreign and domestic, that one barely knows where to start. The mind reels...Whew!

But coming back to the issue at hand.

Thorny political dilemmas like above, involving American citizens supporting political causes in the lands of their fore-fathers, with an eventually unhelpful amount of partisanship, are not unusual.

Note how our policy vis a vis Cuba, at a time when Fidel Castro is slowly exiting the scene, is still frozen in a 1950s time capsule, driven primarily by the political calculations for both parties in Florida with the Cuban-American community.

Other examples abound, including the involvement of Irish-Americans in the turbulent politics of Ireland vis a vis Britain, not so very long ago.

These political passions inherited from our families are very personal and can get more deep-set over time than the strongest cement. 

Growing up as a Hindu in the Middle East, I certainly felt the pressure within my family members to support  India, the country of my birth, in it's long-standing conflict with Pakistan over several decades. The two countries went through multiple wars, skirmishes and assassinations over that time, and things still seem relatively intractable today. 

I realize now that my utter reluctance to see the conflict in a partisan manner, even as a teenager, was more the exception than the rule.  For some reason, I decided to unthink my family's thinking, and continue to do on this issue today.

To this day, I see the fundamental issues between the countries as a moderate, hopeful for an eventual solution, but cognizant of the mountain of thorny and pragmatic issues that need to be overcome before anything positive can really happen.

The solutions to inherited political dilemmas of this type, by immigrants in ANY country, are not obvious or easy.  But we should at least see the problems first with a pragmatic and candid eye, which hopefully leads to the beginnings of more fruitful discussions and eventually compromises.

Of course, it'll take our politicians on both side of the aisle, starting to step out of their comfort zones, and risk some of their political capital, before anything can start to happen.  And THAT will take a little prodding by us citizens, regardless of our party affiliations.  Easier said than done, I know.  But we need to re-think our unthinking support on so many urgent matters.

ON ORACLE THE CONSOLIDATOR

ABOUT TIME

Barron's this weekend has a cover story on Larry Ellison and how Oracle, the company he co-founded has executed an aggressive strategy of consolidating the maturing Enterprise Software business over the last few years.  The whole piece is worth reading, but here are some key excerpts:

"Ellison has transformed the humdrum database concern he co-founded in 1977 into the world's largest seller of business software. Thanks to an acquisition spree unprecedented in Silicon Valley, Oracle (ticker: ORCL) is now a behemoth with $22 billion in annual revenue. It is also strikingly efficient, having boosted its operating margins from 36% five years ago to 42%, topping those of perennial industry leader Microsoft (MSFT)..."

"Ellison, 63, certainly hasn't taken long in getting Oracle right. In less than four years, he has rolled up a veritable who's who of the Valley's business-software companies, including PeopleSoft, Siebel Systems and, most recently, BEA Systems. Since the start of 2005, Ellison has snapped up 42 companies for more than $30 billion.

The buying spree has left Oracle No. 1 in two of the three main categories of business software: non-mainframe databases, used in networks of computer servers, and middleware, which allows databases to talk to application programs, such as those used for accounting and payroll. Germany's SAP still holds the lead in enterprise applications, but SAP's brass has been served notice."

Barron's goes on to assert that company though still faces some reservations on Wall Street, trading less favorably than some of it's peers:

"You'd never know any of that from Oracle's stock. At a recent 21, it's changing hands at just 13.4 times the consensus earnings estimate for calendar 2009, below the multiple for the broad market. Although the P/E is about the same as those of rivals Microsoft, SAP (SAP) and IBM (IBM), Oracle's earnings growth is markedly stronger, offering investors more bang for the buck."

And offers some reasons of why this may be the case:

"So why isn't the stock higher? Some money managers simply don't care for Ellison and will tell you so. Many of them are concerned that Ellison isn't engaged enough, owing to his sailing competition -- he's recently been involved in a court case about when and where the prestigious America's Cup races should be held. Oracle fans, for their part, insist that Ellison is laser-focused on the business.

Then there are the skeptics who think the revenue and profit growth is simply the result of adding one new acquisition after another.

Some investors are suspicious that Oracle is hiding problems with the core businesses behind the accounting of the acquisitions, though evidence of this is nonexistent."

The piece also covers elements of the Oracle business model that merit consideration:

"Consider its high-margin, cash-generating maintenance business, which entails keeping products current for customers and providing "patches" to protect against potential problems.

Maintenance revenues -- reliable, annuity-like streams -- have grown some 24% a year during the past six years and show no sign of letting up. Oracle enjoys a maintenance-renewal rate of 90%, above the industry average in the mid-80% range. This year, maintenance revenue should come to about $10 billion, or just under half of Oracle's total revenue.

What's more, with operating margins of 90%, maintenance is on track to account for some 70% of Oracle's total operating income."

Overall, the piece does a good job presenting the textbook case of how a leading incumbent goes about consolidating share in a maturing industry.  That this has happened in the once high-growth, enterprise software business, and not in a traditional, industrial business, is the item of note.

ON A BETTER DEAL FOR AUTHORS

HAPPY ENDINGS

Forbes takes a crack trying to imagine how the book industry could be changed by the internet, casting Amazon as the potential savior of the humble author.  This is an exercise long imagined by many internet and media observers, and the "what ifs" have been going on for almost two decades.  Forbes begins to set up the argument as follows:

"Archaic beyond belief, it's an industry that treats its most important asset--the author--badly. Can this go on?

The book market in the United States is worth about $32 billion a year; the rest of the world, an additional $36 billion. Who makes the money? Not the author.

Retailers take almost 50%. The agent takes 15% to 20%. The publisher gets squeezed--it's cause for huge celebration if they make 20%.

"On a book that costs $24.95, the author gets at most $1 to $1.50," says Eileen Gittins, chief executive of Blurb, an online print-on-demand publisher of photography books."

The article then goes on to posit how Amazon could change things in the author's favor:

"Amazon is poised to revolutionize the book printing business through vertical integration. Let’s look at the numbers. Assuming that Amazon already pockets 50% of the retail price of a book, it could directly engage with authors and cut out the middlemen: the agent and the publisher. That would free up 30% to 40% of the pie, which can easily be split between Amazon and the author.

Let’s say, in the new world, Amazon becomes the retailer, marketer, publisher and agent combined and takes 65% of the revenues, offering 35% to the author--we end up with a much better, fairer world."

The piece doesn't offer any particular reason why this should happen now and why it hasn't happened already given that Amazon has been a big player in book retailing for over a decade now.  Neither does it mention new channels of possible distribution via Amazon like it's fledgling Kindle electronic book reader.

But more to the point, there's no reason why the split to the author needs to stop at 35% via online distribution.

In a separate but related example, Apple is about to unleash an online distribution store for software applications via it's iTunes store for the new and improved 3G iPhone to be related in a few weeks.  The split in that case for third-party application developers would be 70/30, with the developer keeping 70% and Apple keeping the smaller 30%.

And of course the same potential has been long anticipated in the music business, where the artist today makes a much smaller piece of the revenue pie and online distribution has for now merely expanded their ability to make more selling not the music but concert tours and related goods off-line.

The authors/creators/artists in all these industries are waiting for the split to get much better in their favor.  And it's been a long wait for all for some online nirvana.

ON THE RELATIVE COSTS OF GREEN

CLOSER LOOK

With oil prices up to $125/barrel, mainstream interest in energy alternatives has obviously soared, and most politicians have obviously jumped on the bandwagon, regardless of the collateral costs.  Witness what government subsidies for corn-based ethanol has done to help boost global food prices.

The Wall Street Journal has a piece that takes a stab at looking at the relative costs of the alternatives on a more uniform basis:

"...maybe we should look at what our energy subsidy dollars are buying now.

Some clarity comes from the U.S. Energy Information Administration (EIA), an independent federal agency that tried to quantify government spending on energy production in 2007. The agency reports that the total taxpayer bill was $16.6 billion in direct subsidies, tax breaks, loan guarantees and the like. That's double in real dollars from eight years earlier, as you'd expect given all the money Congress is throwing at "renewables." Even more subsidies are set to pass this year.

An even better way to tell the story is by how much taxpayer money is dispensed per unit of energy, so the costs are standardized. For electricity generation, the EIA concludes that solar energy is subsidized to the tune of $24.34 per megawatt hour, wind $23.37 and "clean coal" $29.81. By contrast, normal coal receives 44 cents, natural gas a mere quarter, hydroelectric about 67 cents and nuclear power $1.59."

The piece goes on to add:

"The same study also looked at federal subsidies for non-electrical energy production, such as for fuel. It found that ethanol and biofuels receive $5.72 per British thermal unit of energy produced. That compares to $2.82 for solar and $1.35 for refined coal, but only three cents per BTU for natural gas and other petroleum liquids.

All of this shows that there is a reason fossil fuels continue to dominate American energy production: They are extremely cost-effective. That's a reality to keep in mind the next time you hear a politician talk about creating millions of "green jobs." Those jobs won't come cheap, and you'll be paying for them."

Given the relative efficiency of nuclear power and other lower cost, but otherwise politically controversial alternatives, perhaps more attention needs to be paid to public policy on those fronts.  We may end up getting more "Green efficiency" in the traditional sense of green.

ON CRICKET RE-MADE

SLICE AND DICE

The Wall Street Journal has a great story on how Cricket, one of the world's biggest sports, and almost a religion in India, is being dramatically morphed and gussied up for big-time media commercialization in that country with over a billion fans:

"A new cricket league in India is attempting to take over the sport, backed by nearly a billion dollars, loud music and cheerleaders.

The Indian Premier League, which began its first season three weeks ago, is a massive departure for cricket. In the traditional format, team members dressed in white play eight hours a day for five days, with breaks for lunch and tea.

In the new format, games last about three hours total. During breaks, spectators sing and dance along to Bollywood songs. One team flew in the Washington Redskins cheerleaders for three weeks to train its squad of dancers and perform at matches.

The league consists of eight teams based in different cities around India, and they will compete in 59 games total over six weeks. It is the first ever city-based cricket league in India and the first to allow foreign players. Foreign players make up about 35% of the league, but each team can play no more than four per match. (A team can have 11 players on the field at a time.)"

The money commitment to date is also big, as the article goes on to explain:

"Backing the teams are some of India's best-known names from business and entertainment. Mukesh Ambani, head of part of the Reliance corporate empire and one of the world's richest men, and liquor baron Vijay Mallya each paid about $112 million for a franchise. India's biggest Bollywood star, Shah Rukh Khan, spent $75 million along with two partners for a team in Kolkata, formerly Calcutta.

The total paid for all eight teams was more than $700 million. Sony Entertainment and Singapore-based sports agency World Sport Group paid $918 million for the 10-year broadcasting rights.

Games are also being shown globally. Willow TV, a California-based company that provides live video of cricketing events on its Web site, owns the rights to distribute the games in North and South America across television, radio and the Internet."

It's too early to tell how successful this venture will be, but there are signs that the new cricket format is attracting new viewers, especially women. 

It also remains to be seen how successful the new format and league team end up being with the broader population of Indians around the world.  In recent years, this Indian diaspora has also been a great growth market for traditional Bollywood movie fare in the form of DVDs, Pay-per-view, and theater exhibition.  Perhaps Cricket 2.0 will be as well-received around the world over time.

ON BEIRUT 2.0

NOT AGAIN

While we're just coming to grips with the over 100,000 casualties from the cyclones in Burma (aka Myanmar), another heart-breaking tragedy is ensuing overseas.  This one is man-made, and it's the seeming lurching of Lebanon into a second civil war, with the current Sunni-Shia fighting in the capital Beirut.  As this Reuters story explains:

"Fierce clashes raged in Beirut on Thursday after the Iranian-backed group Hezbollah said the U.S.-supported Lebanese government had declared war by targeting its communications network.

Fighters from Hezbollah and the allied Amal group exchanged assault rifle fire and rocket-propelled grenades with pro-government gunmen in several areas of the capital in the worst domestic fighting since the 1975-90 civil war."

This like most things in the Middle East is just a symptom of the on-going proxy political wars that have been underway for some time now.  The piece goes on to state:

"The airport was barely functioning with only a few flights arriving and taking off, airport officials said.

The fighting in Beirut erupted minutes after Hezbollah chief Sayyed Hassan Nasrallah told a news conference that the only way out of the crisis was for the government to rescind the decisions and to attend talks aiming to end a 17-month-long political conflict with the Hezbollah-led opposition..."

"Hezbollah has led a political campaign against Prime Minister Fouad Siniora's anti-Syrian cabinet. The crisis has paralysed much of the government, left Lebanon with no president for five months, and already led to bouts of violence.

The group was the only Lebanese faction allowed to keep its weapons after the civil war, to fight Israeli forces occupying the south. Israel withdrew in 2000 and the fate of Hezbollah's weapons is at the heart of the political crisis."

There are no easy, quick answers here, like most political conflicts in the region.  The U.N. and various western governments are of course are involved as well.  But it's truly sad to see Beirut and Lebanon take a step or two back after so many years of relative peace and re-building.

ON THE FREEDOM AND OIL CORRELATION

OILY POLITICS

Thomas Friedman has an op-ed titled "The Democracy Recession" that quotes some interesting data on the connection between oil and freedom around the world:

"The term “democratic recession” was coined by Larry Diamond, a Stanford University political scientist, in his new book “The Spirit of Democracy.” And the numbers tell the story. At the end of last year, Freedom House, which tracks democratic trends and elections around the globe, noted that 2007 was by far the worst year for freedom in the world since the end of the cold war. Almost four times as many states — 38 — declined in their freedom scores as improved — 10.

What explains this? A big part of this reversal is being driven by the rise of petro-authoritarianism. I’ve long argued that the price of oil and the pace of freedom operate in an inverse correlation — which I call: “The First Law of Petro-Politics.” As the price of oil goes up, the pace of freedom goes down. As the price of oil goes down, the pace of freedom goes up.

“There are 23 countries in the world that derive at least 60 percent of their exports from oil and gas and not a single one is a real democracy,” explains Diamond. “Russia, Venezuela, Iran and Nigeria are the poster children” for this trend, where leaders grab the oil tap to ensconce themselves in power."

Energy prices have obviously not been the only contributor to these trends in these oil-producing countries.  Each has unique political and social considerations that also have been drivers of their control-oriented domestic politics.  And these things tend to move in cycles, so the pendulum at some point will start to swing the other way.  But it's an important snap-shot of the current affairs of states to keep in mind for now.

ON DUAL-CLASS STRUCTURES FOR TECH COMPANIES

TEN FOR ME, ONE FOR YOU

Marc Andreessen has a post well worth reading today explaining why he's gone from being an opponent of dual-class share structures for companies to being a support of them, especially for young tech companies with passionate founders interested in creating a major long-term franchise. 

It's a comprehensive and well-argued position, covering everything from how it's worked so far for companies like Google and how it may have changed the merger dynamics between Microsoft and Yahoo! had Yahoo! had a similar structure.

Marc makes a particularly seductive  argument on how the current public market environment has short-term forces that can be truly distracting to creating long-term shareholder value.  And how dual-class structures would insulate world-class, deserving tech companies from these nasty market forces.

The whole argument works only if the founders turn out not to be bozos in the long-run, so ensconced in their own cocoon that they truly don't work in the best interests of their majority, long-term shareholders.

It works only if the founders stay wise and visionary, and are able to execute through both the short-term and and long-term challenges of running a large, fast-growing, world-changing technology company.

And the history of the markets, both public and private, have taught us that those folks are few and far between to be found.

And even visionary, extraordinarily capable founders invariably run into periods where their very successful companies are in a long period of funk.  In the world of technology, Bill Gates, Michael Dell and Larry Ellison come to mind.  Not to mention Steve Jobs, who got in to trouble enough to have to leave the company he founded.  And go through a  unique set of circumstances to be invited back and save the day.

And all those successful and rewarding companies where both founders and  public share-holders did just fine without dual-class voting structures.

Problem i