Explaining Southern California's economy

Are you ready for a flock of black swans?

"Black Swan" encapsulates in a ballet the improbable arrival of the rare bird — and event that's become a source of great concern to companies.

I just came across this Booz & Co. white paper by Matthew Le Merle, a partner in the firm's San Francisco office. Titled "Are You Ready for a Black Swan? Stress-Testing the Enterprise with Disrupter Analysis," it expands on Nassim Nicholas Taleb's book, "The Black Swan," in which Taleb outlined the dreaded black-sawn event. In a nutshell, a black swan shocking and impactful, but — and this is a big but — it's rationalized after the fact. If we had known X,Y,Z, we could have seen it coming.

The general assumption is that black swans are rare. At one point in human history, people weren't sure black swans even existed. However, in terms of the Talebian metaphor, black swan events are supposed to be infrequent. But La Merle points out that, for various reasons, we could be looking at a future that features flocks of black swans:

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Obama corporate tax cut: The fight over 3 percent

Obama Visits Master Lock Company, Discusses Economic Plan In Milwaukee

Scott Olson/Getty Images

MILWAUKEE, WI - FEBRUARY 15: U.S. President Barack Obama speaks to workers at the Master Lock factory on February 15, 2012 in Milwaukee, Wisconsin. Obama applauded the company, which he cited in his State of the Union address, for bringing back 100 jobs to the U.S. from China. (Photo by Scott Olson/Getty Images)

The Obama administration has come out with a proposed cut to corporate taxes, from the current 35 percent to 28. The White House says the cut would be "revenue neutral," meaning that whatever revenue is lost in that 7 percent solution would be made up by eliminating tax breaks and loopholes. 

Republicans are allowed to like this — but not too much. Their pool of candidates all want to cut corporate taxes as well, but by larger margins than Obama. Mitt Romney wants 25 percent, while Gingrich, Santorum, and Ron Paul all want to go lower. Paul, in fact, wants to cut corporate taxes down to 15 percent.

Romney's plan is the only realistic alternative to Obama's. Which raises the question: "Will Republicans and Democrats really fight it out over three percent?"

Of course they will, and it may come down to who's plan is really the more "revenue neutral." On its face, Obama's is, while Romney can't get his additional three percent without cutting spending. You can see the difference: Obama's plan gives with one hand but takes with the other; Romney's gives and then gives some more, by using corporate taxation — or lack of it — to reduce the size of government.

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Man defies Newt Gingrich, installs gun rack in Chevy Volt

First, Newt Gingrich insisted while on the campaign trail that you can't put a gun rack in a Chevy Volt, the gas-electric hybrid vehicle that Newt referred to as an "Obama car." 

Then General Motors, the company that builds the Volt, took the high ground in a post titled "We Did Not Engineer the Volt to Be a Political Punching Bag." The company — famously bailed out by a combination of the Bush and Obama administrations, the pushed through bankruptcy before emerging as a serially profitable enterprise — pointed out that you can put a gun rack in a Volt, but asked why you would want to. It's a durn sedan, after all.

The chap above set out to prove Gingrich wrong, quote literally. What's impressive here is not just that you can install a gun rack in a Volt, but that you can install one in about half an hour using $7 in materials.

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Google goggles coming later this year

Google Stock Photo

Kimihiro Hoshino/AFP/Getty Images

The Google logo is seen at the Google headquarters in Mountain View, California. on September 2, 2011. AFP PHOTO/KIMIHIRO HOSHINO (Photo credit should read KIMIHIRO HOSHINO/AFP/Getty Images)

Eyeglasses. They're just so stupid, sitting there on your face, enabling you to do little more than see better and, in certain chunky black Buddy Holly-esque cases, branding you as a probable resident of Williamsburg, Brooklyn. But Google plans to change all that, with "heads up display glasses," according to the New York Times' Nick Bilton:

The glasses will send data to the cloud and then use things like Google Latitude to share location, Google Goggles to search images and figure out what is being looked at, and Google Maps to show other things nearby, the Google employee said. “You will be able to check in to locations with your friends through the glasses,” they added.

Everyone I spoke with who was familiar with the project repeatedly said that Google was not thinking about potential business models with the new glasses. Instead, they said, Google sees the project as an experiment that anyone will be able to join. If consumers take to the glasses when they are released later this year, then Google will explore possible revenue streams.

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Could Apple actually pay shareholders?

Apple's New iPhone 4s Goes On Sale

Justin Sullivan/Getty Images

Apple Store customers look at the new Apple iPhone 4Gs on October 14, 2011 in San Francisco, United States. The new iPhone 4Gs features a faster dual-core A5 chip, an 8MP camera that shoots 1080p HD video, and a voice assistant program.

The bigger Apple gets, the more pressure it comes under to share some of the wealth. With a cash pile now approaching $100 billion, the idea of a one-time dividend is being floated. This is from Therese Poletti at MarketWatch:

“Instituting a regular dividend would be a signal of a new maturity in the way the company views itself,” [said management professor James] Post.... “That would be a much bigger statement of change for the company. I think there is probably a debate going on.” And the ghosts of CEOs past are clearly in the room.

Post said a special dividend could be an interim solution for the company. “If they want to they can always come back in a year or two or three, they can do it again, but they are not committing themselves to a regular dividend,” he said. “It would be seen as a pretty big departure from the Jobs era.” It’s a tactic used by Microsoft in 2004, when it announced a one-time dividend of $3 a share, to use return some cash to investors.

A one-time dividend is obviously not very popular among most investors.

“I think that Apple’s stock is and should be like Apple’s sales and products, insanely great,” said individual shareholder King Lear, who spoke up at the company’s annual meeting last year. “Defined quarterly dividends would increase the value of the stock in addition to its incredible capital growth.”

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