Musings Report #37 9-8-12 Micro-Corporations and "leave your cellphone at home"
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The Micro-Corporation
Correspondent Michael Reps introduced me to the concept of the "micro-corporation," what he views as the natural consequence of these three key trends:
1. the breakdown of the Venture Capital Model
2. the adoption of Cloud Infrastructure
3. the predominence of "Search"
There is much to be said about this topic, but in broad brush the point is that many companies no longer need tens of millions of dollars in venture capital to launch or reach profitability. This is starving the VC community of tech companies that need major money. This matters, as VCs demand and take half or more of the company in exchange for the capital. (This is the origin of the phrase "vulture capital.") Why give away half of your company for money you don't need?
Cloud infrastructure (cloud computing) enables office-less companies that have low-cost access to technology that once required vast investments. "Step Into the Office-Less Company: How One Tech Firm Manages 123 At-Home Employees Scattered Across 26 Countries and 94 Cities" (WSJ.com)
Here is how Michael describes the power of Search:
"Search empowers not only the consumer but businesses by providing answers to their immediate ignorance. Industries that relied on the ignorance of others are being pushed out. Now, a good business needs to assume their customers will be able to know or uncover whether or not their products or services are the best value for money. Search is essentially death to the intermidiary or middle man."
All this suggests an increasingly bifurcated economy where a relative handful of global giants (Exxon, WalMart, Apple, IBM, etc.) continue to gain financial, manufacturing and marketing "mass" at the expense of smaller, less capitalized rivals globally, while micro-corporations avoid the problems of raising capital and scaling up altogether. I intend to write more on this, as the implications are profound.
"Leave your cellphone at home"
Consider the ramifications of this statement: "Cell phones are tracking devices that make phone calls." That should give us all pause, for the implication is that the best intelligence-gathering device is in your pocket or purse.
What's disturbing about this convergence of domestic intelligence gathering and mobile phones/devices is the intelligence community has morphed from investigating crimes and criminal networks to gathering "intel" on everyone and then sorting that haystack for evidence of potentially anti-government intent or networking. Here are a few key paragraphs of the article: (via Maoxian)
Appelbaum: Cell phones are tracking devices that make phone calls. It’s sad, but it’s true. Which means software solutions don’t always matter. You can have a secure set of tools on your phone, but it doesn’t change the fact that your phone tracks everywhere you go. And the police can potentially push updates onto your phone that backdoor it and allow it to be turned into a microphone remotely, and do other stuff like that. The police can identify everybody at a protest by bringing in a device called an IMSI catcher. It’s a fake cell phone tower that can be built for 1500 bucks. And once nearby, everybody’s cell phones will automatically jump onto the tower, and if the phone’s unique identifier is exposed, all the police have to do is go to the phone company and ask for their information.
Resnick: So phones are tracking devices. They can also be used for surreptitious recording. Would taking the battery out disable this capability?
Appelbaum: Maybe. But iPhones, for instance, don’t have a removable battery; they power off via the power button. So if I wrote a backdoor for the iPhone, it would play an animation that looked just like a black screen. And then when you pressed the button to turn it back on it would pretend to boot. Just play two videos.
Resnick: And how easy is it to create something like to that?
Appelbaum: There are weaponized toolkits sold by companies like FinFisher that enable breaking into BlackBerries, Android phones, iPhones, Symbian devices and other platforms. And with a single click, say, the police can own a person, and take over her phone.
So security culture stuff sounds crazy, but the technological capabilities of the police, especially with these toolkits for sale, is vast. And to thwart that by taking all the phones at a party and putting them in a bag and putting them in the freezer and turning on music in the other room—true, someone in the meeting might be a snitch, but at least there’s no audio recording of you."
Market Musings
Last week I presented the SPX-VIX ratio chart which tracks the S&P 500 and the VIX measure of volatility. It suggested the market was at a "buy" point. That certainly panned out, and now the ratio is nearing recent highs that signaled near-term tops in price. This suggests "caution is advised" as the ratio is already in the vicinity of previous highs. Can the SPX continue drifting higher while the VIX drifts lower? That would push this ratio to new extremes.
I present a second "food for thought" chart this weekend: the ratio of NYSE stocks above their 50-day moving average (MA) and those above their 200-day MA. Broadly speaking, this is a measure of market strength, as there are many stocks above their 200-day MA (since the market has rallied strongly for 3 years) and a fluctuating number of stocks above the shorter-term 50-day MA.
This chart is not necessarily intuitive, as short-term declines cause the ratio to spike down (recent lows are circled), while a sustained longer-term decline will take stocks below both moving averages. What is the point of this chart? It is of course open to interpretation, but it suggests the move off the June lows has already returned to levels that marked the tops in recent rebounds. As always, this is not to be taken as a suggestion to pursue a trade, it is only "food for thought."
From Left Field
STEVE JOBS: UNSEEN IMAGES BY NORMAN SEEFF, 1984 (via Maoxian) Wow, was he young.... I bought the first Mac as soon as it was available, 1984....
Here's your Sickcare system in action: Scorpion sting leaves Ahwatukee woman with a big bill (via Adam M., who wrote: "A woman here in the Phoenix area got stung by a scorpion, had an allergic reaction, and needed to go to the hospital to be treated with anti-venom. The woman has health insurance but still received a bill from the hospital for the remaining balance of $25,537. Lest you think this is a story about a "greedy" insurance company, the insurance company gave the hospital what I think is an absurdly large sum for the small amount of services rendered: $57,509. But the total bill was $83,046, so this well-insured, middle-class professional woman was still left with a gigantic hospital bill for a measly scorpion sting. The vast majority of the bill was for the two doses of scorpion anti-venom, for which the hospital charged $39,652 per dose. This anti-venom was made in Mexico, and according to the article, pharmacies in Mexico are charging about $100 per dose for the exact same anti-venom."
Expat in China: why I'm leaving (via B.C.) One of the 'truthiest" accounts of modern China I have read, and I can confirm its veracity via similar accounts by our young Chinese friends, who would never tell strangers the truth lest China "lose face."
More on Happiness: It’s All About the Ending "I’ve found that the older adults with higher levels of self-esteem and well-being are the ones who tend to focus on those positive events from their lives. Long-term happiness often depends on your forming a favorable narrative of your life. Those who ruminate over their failures, disappointments, and mistakes are not only less happy in the moment, but also risk experiencing chronic depression."
"The truth is like a bullet that pierces through the armor of charlatans." Jacob Appelbaum
Thanks for reading--
charles
