Monthly Archives: December 2013

Public Opinion Turns Against Labor Unions in California

Irv Lefberg33

Blacksmith

Check out this story in the Sacramento Bee.

http://www.sacbee.com/2013/12/13/5996736/public-opinion-turns-against-labor.html 

This story was front page news in some California newspapers, but didn’t get much coverage elsewhere.   As the title of today’s post says, the latest public opinion polls in California – conducted by the reputable Field Poll organization – show a sharp drop in public support for labor unions.

This story is really about growing anger with public sector unions over strikes (e.g., the recent San Francisco transit strike) and (taxpayer supported) government employee pensions.  The sometimes highly generous pensions have been (rightly in some cases, wrongly in many others)  blamed for a lot of municipal government fiscal woes.  California has many more real (and highly publicized) municipal pension abuses than most states.

When public sector unions are the bulk of remaining labor union membership and power, this  is a big problem for the labor union movement.   When Wisconsin Governor Scott Walker and the Republican legislature, last year, stripped public sector unions of their collective bargaining rights, Labor characterized Wisconsin as ground zero,  a critical battle ground, for all labor union rights.

The effort to recall Walker failed, not only because conservative special interest money poured in from outside the state to support him, while national Democrats dithered, but because even in (generally) progressive Wisconsin, liberals are,  at best, ambivalent, about public sector unions.

Public sector unions have always been viewed and treated differently from their private sector relatives. The clearest justification for this is still Franklin Roosevelt’s 1937 letter to the National Federation of Federal Employees.  http://www.presidency.ucsb.edu/ws/?pid=15445 .  (Walker invoked FDR’s words in the recent battle in Wisconsin.  His opponents pointed out that FDR, unlike Walker, was generally and ardently pro union, and that Walker’s motives were different).

With the private sector rate of unionization in the U.S. falling to its lowest percent since 1932, labor advocates, who view the decline as the major reason for stagnation of worker wages, face an uphill battle.  How to leverage still strong, but increasingly unpopular, public sector unions in this fight, is a major challenge.  California’s Field Poll confirms that.

 

Google Punishes “Rap Genius” for Gaming Search Engine Rankings

greg_band3Check out this story in December 26th N.Y. Times.  http://www.nytimes.com/2013/12/26/business/media/google-penalizes-rap-genius-for-gaming-search-rank.html?rref=technology&_r=0

The N.Y. Times reported “Google has punished a provocative music-lyrics website after learning it had unscrupulously tried to improve its search rankings.” (From the NY Times story).

This story wasn’t exactly buried.  While it was not front page news, it appeared in the business pages of all the major newspapers and was discussed in many media and business blogs.

The most consequential implications of the story were missed, because it is commonplace for Google to make, (constantly) revise, and police the rules governing where sites get ranked on its pages. So, in many respects it was not really news.

Rap Genius was apparently caught by Google using “unscrupulous” methods to boost the number of links to its website.  One of the mainstay factors in Google’s ever changing and mysterious algorithm for ranking websites, is the number of links to a site.   A large number of links suggests, to Google, that the site is important and  merits  appearance on the first few pages of a search.  Where a commercial website ranks can of course make or break a business.

Anyone with the slightest knowledge of “search engine optimization” (SEO) tries to “game” the system in some manner by accumulating links to its site.   Some methods, such as creating hundreds of phantom blogs or sites and then linking them to one’s main website,  are clearly unscrupulous.  Other approaches, such as using social networking to increase awareness of your site, are clearly appropriate, encouraged by all the SEO gurus, and advised by Google.

Many methods fall in a gray area.  Rap Genius apparently induced music bloggers to link to its site by rewarding them with mentions and favorable treatment on its social media accounts, like Twitter and Facebook.

It is not abundantly clear to me how this method is materially different from other, approved SEO activities.  Or that Rap Genius’  efforts were especially tricky or uncommon.  But Google chose to make an example of the provocative service.  The result: Rap Genius, for now, is removed from the front pages of Google searches.  That could kill the business.

The most significant implications of this story are the potent reminders that…..

1) Google has enormous power to make or break a business.

2) Google’s methods and rules are opaque; understood only by businesses with the money to hire the best and brightest SEO experts. 

3) Small business is at a distinct disadvantage in mastering Google.

4) The Internet has not leveled the playing field, as promised; to the contrary it has given bigger businesses a greater advantage; and….

5)  Small businesses are preyed upon all the time by unscrupulous “SEO experts” who promise to make them “show up on all the search engines” for a “small” monthly fee, which (most often)  means not much more than getting the company “registered” with Google and a few other search engines. First page?  Fogettaaboutit, unless you have the money to game Google, in which case you could get punished. .

Another issue raised by this story is the willingness of many to entrust a private operator, like Google or Regence Blue Shield with decisions that can make or break a business or a human life, but scream at the idea of government performing the same functions.  

I’m not advocating for a government agency to take over search engine rankings, but I would appreciate an articulation of why its OK for Google to have all this power, but not an agency run (albeit) by a “bureaucrat,” who has been appointed by someone actually elected by many people?  Am genuinely interested in a good answer to that question.  One possible answer is:  Better to have multiple tyrants, each in their own sphere, rather than one tyrant dominating many spheres.   Their ought to be a solution somewhere in between Google and the Federal Government. 

Primarq to Enable Owners or Buyers to Sell Shares in a Home

Want to buy shares?

This story,about a new way to buy a house,  appeared on page 8 of the LA Times on December 15th.   Check it out.   http://www.latimes.com/business/realestate/la-fi-lew-20131215,0,7858562.story#axzz2nh3BQaDN 

This story reports on a new method of financing home purchases.  It enables a buyer who can’t come up with the full down payment, to sell shares in the home to investors.   The home buyer uses his own money plus investors’ contributions to secure the mortgage.

The primary owner may reside indefinitely in the home, but when it’s sold, the investors receive a percentage of the capital gain (or partake in the loss). Investors can trade their shares, just as we can sell our Microsoft stock, at any time.  Will the primary owner hold have to hold meetings every year so that stockholders can vote on whether it’s OK to paint the house pink?  Lots of possibilities.

This story is potentially important on many grounds.  If the idea takes off and financial wizards add opaque features, the possibility for bubbles and crashes are as great as the securitization of sub prime loans. On the other hand, if reasonably regulated, this method can lead to more home ownership (which I suppose is good), or increase the efficiency of buying and selling homes, which is also good, if not transformative.  (Back to this point a little later).

The Primarq story and model has other implications.  For example: Why not allow kids or their parents to sell shares in student loans?  When the student gets her first job, or opens a business,  investors receive a percent of the income, with time limits.   Investors could choose among prospective students on a website, and direct their capital to the kid just accepted into Yale’s Astrophysics program.  Down the road some investors will cash in big when she wins a Nobel prize for discovering what preceded the Big Bang. The possibilities for the Primarq idea, like the universe, are endless.

The most important implication of this story is that it provides yet another example of how the financial sector dominates the US economy. Or, put another way, how the business of using money to make money has become the main end of capitalism, rather than just its hand-maiden or life blood (with which I would have no problem).

The dominance of the financial sector is made possible (or a lot easier) by technology, which allows voluminous and  immensely complex transactions to occur with ease, at very little cost per unit.  Primarq could probably not have made money with this idea twenty, or even ten, years ago.   Technology, software, and the internet have dramatically lowered transaction costs.

It is my sense, that instead of trying to make money inventing new tangible, possibly transformative products (the wheel, the basic telephone, the automobile, the computer) and services which materially change our lives (medical treatments, taxi rides, education), way too many smart people are engaged in economic activities which use money to make more money.  Any other impacts are incidental. 

Entrepreneurs of companies like Primarq are not only hoping to make money from fees and advertising, but are playing lottery capitalism. If the web business gains traction,  maybe Schwab or Ameritrade will buy it for $20 million….even it it hasn’t turned a profit yet.

The consequences of the Primarq model, even when you trace its impacts up (or down) the chain of economic activity,  are not, at least in my (limited) vision,  transformative. Not every new business venture can or needs to transform lives. But if so many of our best and brightest are using their creativity and hard earned MBAs to manipulate financial instruments, or get out front with the latest scheme with Ponzi overtones, or get noticed in the lottery economy so they can be bought out for millions, capitalism is being stood on its head; the tail is wagging the dog.  Meanwhile Tesla — you can actually see, touch, and drive the cars — struggles to overcome jibes and obstacles from jealous or threatened interests because they (presumably) couldn’t be making it without selling emission credits. (Well, Boeing would never have made it without federal government contracts which effectively subsidized their R&D).

The Primarq story on page 8 reminded me of all that.   Hey, want to buy shares in a new blog?   As beta testers and founding followers, you will be the first to know about the IPO.   I promise.   Shhhh!