Maybe the reason Tim Tebow does option plays...

...is that he is high variance.

My colleague Dowell Myers says, “'Show me your papers' should be replaced with 'Welcome to English class.'”

He has a lovely op-ed in the New York Times:

  

How do we change course and begin treating immigrants as a vast, untapped human resource? The answer goes to the heart of shifting from an immigration policy to an immigrant policy.

For starters, the billions of dollars spent on border enforcement should be gradually redirected to replenishing and boosting the education budget, particularly the Pell grant program for low-income students. Some money could be channeled to nonprofits like ImmigrationWorks and Welcoming America, which are at the forefront of helping migrants assimilate.

Second, the Departments of Labor, Commerce and Education need to play a greater role in immigration policy. Yes, as long as there remains a terrorist threat from abroad, the Department of Homeland Security should have an immigration component. But immigration policy is all about cultivating needed workers. That means helping immigrants and their children graduate from high school and college. It means that no migrant should have to stand in line for an English class. It means assistance in developing migrants’ job skills to better compete in an increasingly information- and knowledge-based economy.

Thanks to our huge foreign-born population (12 percent of the total), America can remain the world’s richest and most powerful nation for decades. Shaping an immigrant policy that focuses on developing the talents of our migrants and their children is the surest way to realize this goal.

Chicago: if not back to the city there, then where?

The ASSA meetings were in Chicago this year.  Even though the meetings take place in January, I always look forward to their return there, because I enjoy visiting Chicago more than any other American city.  It helps that my daughter goes to school there, but I also find Chicago's urban landscape to be uniquely appealing.  It is somehow dense without feeling overcrowded, the art and restaurant scenes are remarkable, and the architecture is world renowned.  Few things for me are as life-affirming as a walk down Wacker Drive.

Chicago also has decent transit and, for a beautiful large city, is inexpensive.  The median price of a house in Chicago is around $200,000, and even at the peak, prices remained more or less sane. 

Yet between 2000 and 2010, Chicago shed seven percent of its population.  This was not just because the region in which it sits grew slowly; Cook County outside of Chicago gained slightly, and Lake and Kane Counties grew smartly.  Employment in Cook County has fallen more than 10 percent over the past ten years.

I like cities and I root for them.  Yet even in an era when sprawl has become a pejorative, more people leave some of our most appealing cities than move into them.  I suspect a lot of the problem is school quality, and I give Congress for New Urbanism president John Norquist a lot of credit for recognizing this fact.  But many people like living in detached houses on spacious lots.  In the absence of policy interventions such as higher gasoline prices, I don't see this changing anytime soon.

If Commercial Real Estate Investors Avoided the Nine Vernon Martin Traps, We would all be in Better Shape.

In 1988, an appraiser named Vernon Martin III published a six page paper in Real Estate Review called Nine Abuses Common in Pro Forma Cash Flow Projections.  They are:

Over-inflated expected income
Under-inflate expected expenses
An assumption that tenants will always pay expenses
Failure to examine individual leases
Underestimation of vacancy and collection losses
Forgetting that tenant improvements and lease brokerage fees are real expenses
Going-out cap rates that are lower than the going-in cap rates
Ignoring sales expenses
Understating the discount rate.

Thanks to Argus, people are pretty good now at looking at individual leases.  But they don't always do a great job of avoiding the remaining abuses.

The Fed writes a white paper on the GSEs

The conclusion's opening paragraph:

The challenges faced by the U.S. housing market today reflect, in part, major changes taking place in housing finance; a persistent excess supply of homes on the market; and losses arising from an often costly and inefficient foreclosure process (and from problems in the current servicing model more generally). The significant tightening in household access to mortgage credit likely reflects not only a correction of the unsound underwriting practices that emerged over the past decade, but also a more substantial shift in lenders’ and the GSEs’ willingness to bear risk. Indeed, if the currently prevailing standards had been in place during the past few decades, a larger portion of the nation’s housing stock probably would have been designed and built for rental, rather than owner occupancy. Thus, the challenge for policymakers is to find ways to help reconcile the existing size and mix of the housing stock and the current environment for housing finance. Fundamentally, such measures involve adapting the existing housing stock to the prevailing tight mortgage lending conditions--for example, devising policies that could help facilitate the conversion of foreclosed properties to rental properties--or supporting a housing finance regime that is less restrictive than today’s, while steering clear of the lax standards that emerged during the last decade. Absent any policies to help bridge this gap, the adjustment process will take longer and incur more deadweight losses, pushing house prices lower and thereby prolonging the downward pressure on the wealth of current homeowners and the resultant drag on the economy at large.

Back with commentary in a bit.

Why Web OS Really Failed, and What it Means for the Rest of Us

The New York Times has an interesting article this week explaining why HP's adventure with Palm failed.  The latest explanation is that Web OS just wasn't ready for prime time, according to Paul Mercer, who was senior director of software at Palm (link).

Paul's an extremely bright software guy.  It's unusual for someone with his seniority to go on the record with criticisms of his former product, and I applaud him for it because it helps us all learn.  If Paul says Web OS was unready, I'm sure it was.  But respectfully, I don't think that's why Web OS failed. I think the company's business strategy was fundamentally flawed, in ways that would have almost certainly doomed Web OS no matter how it was built.

The point is important because other companies planning similar products might take away the wrong lesson from Palm's demise.  (For example, Information Week concludes that it's too hard for any startup to play in the mobile device market [link]; MIT Technology Review says the lesson is that you have to retain key employees [link].)  To explain what the right lesson is, I need to give you a little background on the dynamics of creating a new operating system.


New operating systems always suck

Sorry for my language, but sometimes it's best to be blunt.  An operating system is an incredibly complex piece of software, just about the most complex software you can write.  In the first version of an OS, the list of features you want to add is always much longer than what you can implement, there are always bugs you can't find, and performance is always a problem.  What's worse, there is a built-in tension between those three problems -- the more features you add, the more bugs you create.  The more time you spend fixing bugs, the less time you have to improve performance.  And so on.  As a result, every new operating system, without exception, is an embarrassing set of compromises that frustrates its creators and does not deliver on the full promise of its vision. 

Remember these beauties?

--The original Macintosh can't create a word processing document longer than 10 pages.

--The original version of Windows can't display overlapping windows.

--The original iPhone doesn't allow third-party native apps, and lacks 3G and MMS support.

The operating systems that succeed are the ones that survive long enough for their big flaws to be fixed.  That happens if the OS's supporter has a deep, multi-version commitment to it (Windows) or if the OS does something else so compelling that customers are willing to buy it despite its flaws (graphics on the Mac).  Your chances are best if you have both patience and differentiation.


Palm's problem: Lack of a compelling advantage

The Palm Pre and HP TouchPad had neither advantage.  Palm was not rich enough and HP was not patient enough to keep investing after the first versions showed a lot of flaws.  And more importantly, there was nothing compelling enough about either product to make people buy it despite those flaws.

Think about it, what was the one special thing Web OS devices could do that absolutely compelled you to go out and buy them?  And don't say "multitasking;" I'm talking about a genuine, easily explained benefit that would appeal to normal people, not technophiles.

I wrote about this problem back in 2010 when the Palm put itself up for sale (link).  To recap: you don't run TV ads featuring a Borg hive queen if you have something compelling to say about your product (link).

Hi, I'm here because the ad agency couldn't figure out anything concrete to say

Contrast those ads to Apple's current iPhone ads in the US, which are basically a 30-second demo of Siri (link).


The original Palm OS succeeded because it made a great appliance for managing your calendar and address book.  That jump-started the market, and all the additional stuff empowered by the OS came later.

iPhone succeeded, in my opinion, because it was the first device to make PC-style browsing work well on a smartphone.  That killer feature bought Apple the time and market credibility it needed to enable native apps, fix the phone's problems, and add a raft of additional features that fleshed out the product vision.

Android succeeded (in part) because Apple stupidly left a void in the marketplace that Google could fill.  In the wake of Steve Jobs' death, there has been a lot of well-deserved praise online for the brilliant decisions he made.  But I think one of Steve's biggest mistakes ever was the decision to wed Apple exclusively to AT&T in the US for multiple years.  That forced Verizon to find an iPhone competitor and market it aggressively.  Verizon's choices were Windows Mobile (unpopular with customers, and a vendor with a history of shafting its partners), Nokia/Symbian (unpopular in the US, and a vendor with a history of shafting operators), or Google (sexy web brand, believed at the time to be open and non-controlling).  People outside the US don't realize this, but in the US Verizon was the main marketing muscle behind the success of Android.  It forced the product into the market and kept pushing for a long time, giving Google the time it needed to improve Android and get it past the crucial first release.

The Pre and TouchPad had no patient sugar daddy.  And they had no breakthrough feature that would compel people to buy the first versions despite their inevitable flaws.  I think Palm's product strategy was broken, and so Web OS was probably doomed no matter how well it was implemented.


The lesson: Who's your daddy, and what's your killer feature?

Two companies are working on new mobile platforms scheduled to ship in 2012:  Nokia's next-generation Windows phones, and RIM's BlackBerry 10.  In both cases, the press has been focusing on their development schedules.  The schedules are very important, of course.  But the real questions to ask are:

1. Do they have the financial backing to complete versions 2 and 3, which will be needed to fix the inevitable flaws in version 1? and

2. Will the products do anything unique and compelling that will cause at least some customers to prefer them even if they have other drawbacks?

I think Nokia can probably say yes to question 1; RIM is in doubt.  And as far as I can tell, neither vendor has even started to address question 2.  If they don't, in a year or two we'll probably be doing more post-mortems.

Bob Shiller supports a tax credit to fix a housing mess

He writes:

We used to talk a lot about helping homeowners in trouble.
Instead, the bankers were bailed out - and now we hardly talk at all about aiding ordinary Americans. 

Yet the problems facing homeowners today are even bigger than they were in the dark days of the financial crisis. According to the S&P/Case-Shiller 20-city Home Price Index, home prices have fallen 13.2 per cent since Lehman Brothers collapsed in September 2008. Over the same period, of course, unemployment has climbed.
In other words, more homeowners are underwater on their mortgages - and more Americans are out of work. And home prices are still falling. 

So we need to overcome the sense that real help is impossible - and to think about approaches that might be politically feasible. Despite concern over our national debt and a general distaste for spending taxpayer dollars on people who may have been less responsible, there are some potential solutions. 

The piece continues....