Quick Thoughts on the HP Announcement

I like the products, I don't like the event.


What's impressive

I like the devices.  I am disappointed that the tablet doesn't have a stylus, but HP is clearly going for the media player space, and it's a worthy competitor there.  The Android tablets and PlayBook start to look kind of weak in comparison.

I like the idea of a smaller smartphone.  It's something Apple should have done with iPhone.  (It did the same thing very successfully with iPod; why not iPhone?)

I like the integration between the phones and tablets. That's a smart move.  The more HP can make this a competition of product families, the more of a disadvantage the Android cloners will be at.

I like the apparent attention to detail in all of the products.  As you'd expect from a team headed by a former Apple guy, HP/Palm understands hardware-software integration and how to make a product feel good to use.  Even if you never buy one of the HP products, you'll benefit from what it's doing because HP is challenging everyone else in the industry to step up their design and integration skills.  Samsung and Lenovo, take note.

And I love the idea of putting this same OS on personal computers.  It's bold, it's scary, it's...uh, it makes HP look a lot like Apple.  Maybe instead of "Think Beyond" they should have called the event "Think Similar."

And how ironic that HP is moving toward having its own OS just as Nokia is moving toward (reportedly) running someone else's.


What's not impressive

I disagree strongly with the timing and content of the announcement.  I am not talking about the length of it.  Yeah, they went too long, but it's not a big deal in the ultimate scheme of things.  I think there's a much deeper problem here.  Good marketing is like a fan dance -- you don't reveal as much as people think you do, and you always leave them wanting a bit more.  HP built up the expectation that its new products would be available immediately, and then announced stuff that will ship sometime in summer, if not later.  We don't even know prices yet.  This gives competitors a huge amount of time to react, and more importantly the products themselves are going to seem old by the time they ship.

This isn't a fatal mistake, but I think it would have been far more effective if HP had discussed the products only in a "secret" event for developers.  The news still would have leaked, but rather than being disappointed we would have been tantalized and eager to hear more in the months to come.

HP may be developing products more like Apple, but it's still marketing like HP.

SIngapore Envy

Tom Friedman rhapsodizes too much about Singapore.  While it is hardly the least free society in the world, the People's Action Party for all intents and purposes has a political monopoly.  Singapore's GINI coefficient is higher than the United States for income, as is its ratio 90th percentile to 10th percentile income.

Nevertheless, every time I pass through the city-state (I just did for the third time), I am awed by its transportation infrastructure: beautifully landscaped expressways, congestion pricing for automobiles, and well-operated bus and trail transit.  Transit is very clean, fast and efficient, and runs frequently.  The trains are often crowded but somehow not too crowded.  Changi airport is a public works project of the sort that once filled American's with pride--it is to airports what Hoover Dam is to, well, dams.  Changi is also profitable.

So when I come home to Los Angeles, I find LAX to be a little embarrassing.  When I use transit from the airport, the Flyaway Bus, I find it to be unreliable and less than spotless.  The process of buying a ticket (at the end of the journey) is cumbersome.  It would be one thing if LA were unusually bad about such things for US cities, but it is not.  The fact that New York is having a hard time getting a second rail tunnel built under the Hudson also reflects America's seeming inability to provide necessary public works.

Homeownership and Social Justice

I am reading and enjoying Simon Johnson and James Kwak's 13 Bankers. Like a lot of recent stuff (including an OECD report), it takes a swipe, if a mild one, at the virtues of homeownership.   If people think homeownershipp is overrated, I can live with that (even if I disagree with it. Where I do have a problem is when people argue that government "pushes" homeownership on people, whether they really want it or not.

I am not sure that the pushing matters that much--it is entirely possible that people, for reasons beyond financial reasons, want to own houses in particular and real estate in general.  Two things stick with me:

(1) I was talking yesterday with a developer here in India who is trying to building market-rate affordable housing.  He faces a number of hurdles, one of which, he said, is "Indians' obsession with homeownership."

(2) Years ago, when I was in Madison, the guy who cut my hair loved to talk about the rental property he owned in Florida.  It would, he said, be the source of his retirement income.  I asked him why he was so undiversified--why he didn't sell his place and put the money in an index fund.  His reply was that he didn't trust Wall Street, and that he needed an investment that he could "touch" as well as control.  I told him his mistrust of Wall Street was misplaced--shows what I knew at the time.

The point is that there is something about real estate that reduces agency problems,  One may not be able to control markets, but one can control the management of real estate that one owns.  I do remember when I left the rental market for the owner market, I was very happy, not because I thought I would make out financially (house prices in Madison had been stagnant for years), but because I disliked my landlord, and was relieved that I would no longer have to write a check to him. 

This is not to say putting people in houses they cannot afford is a good idea, and I have long been dubious of very low downpayment schemes (I do think homeowners who put no equity into their houses are not really owners).  But it is a little too easy for people who own houses (or have the choice to do so) to say it is not important to make the option available to others.  Freedom to some extent means the ability to take control of one's own life, and to avoid agency issues as much as possible. 

I freely confess that this is all supposition based on informal observation.  Some work has been done on how ownership solves some agency issues, but I think it is an understudied phenomenon.  If anyone wants to help me think about how to model such things formally, I would welcome the assistance.

According to an informal vote of Indian School of Business MBAs...

...the cities with the most potential for real estate investment in India are Pune and Ahmedabad. 

How much freedom to choose?

Ed Glaeser argues that the "moral heart of economics" is "freedom" and in particular the "freedom to choose:"

Improvements in welfare occur when there are improvements in utility, and those occur only when an individual gets an option that wasn’t previously available. We typically prove that someone’s welfare has increased when the person has an increased set of choices.

When we make that assumption (which is hotly contested by some people, especially psychologists), we essentially assume that the fundamental objective of public policy is to increase freedom of choice.

I will leave it to others to dispute the notion that more choices are always better than fewer.  But I can't help but think that it is to easy for those of us who are tenured professors to extoll the virtue of free choice, for the simple reason that we get so many, well, choices.  We get to choose what we write, we to a large extent get to choose what we teach inside our classes, and we can piss our deans off and pay fairly little in the way of consequences.  We might not get a raise or we might have to teach a class that we would rather not, but this is all small beer.  We can make an awful lot of choices and still be economically secure.

Now consider the administrative assistant at a corporation who has a boorish boss and a sick kid.   The company she (he) works for has a good health insurance plan, but if she were to leave, she would find herself unable to get coverage at a reasonable price.  Does she really have choice?

Consider the West Virginia coal miner who goes into a dangerous mine every day, and whose life expectancy is shortened with each hour worked underground.  Now consider the fact that the miner grew up in a West Virginia town with a poor school in an environment where going to college was a rare phenomenon.  Does that miner have a choice?

I could go on, but I think the point is fairly clear.  There are times when government intervention could expand the choice set up a large number of people.

Ed does point out how government can improve choice sets, and for that he deserves credit.  But the more fundamental problem is that market economies produce large institutions that have limited markets inside of them, and therefore sometimes have hierarchies that can be as inhospitable to personal liberty as government bureaucracies.  Elinor Ostrom's Nobel win in 2009 shows that the economics profession is beginning to recognize this problem,  but I am not sure Ph.D. students are broadly encouraged to study it.    

Uh-oh

I met with a large developer here in India.  He told me that "rent models," (i.e., discounted cash flow models) don;t work in India--that everyone wants to own property in India, and so India is different.  I remember a Japanese real estate guy telling me the same thing about Japan in the late 1980s.

At least there isn't a lot of leverage here, so the systemic risk of a collapse in prices is lower.  But still....

Mark Thoma passes on terrible news about Maxine Udall, girl economist

To all Maxine Udall Girl Economist Readers

I didn't know who she was, but I felt like I knew her.  She was smart and wise.