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How to save America: Build better cities
Felix Salmon has an interesting post today about how China has managed to keep it together depsite very trying economic times. The bottom line? Healthy investment in urban infrastructure. Which has fueled a boom in the creation of service-related jobs — just what you want if you need to think long-term about moving your economy away from agriculture and manufacturing.
Cities, therefore, are good. Of course, China can do fine with a mix of agricultural and manufacturing labor at its core, with services a distant dream. The U.S., on the other hand, needs to push for service employment, as that's where the high incomes are. And we need high-income jobs to define America's future. Felix offers his formulation for how to get them:
How do you create service-industry jobs? By investing in cities and inter-city infrastructure like smart grids and high-speed rail. Services flourish where people are close together and can interact easily with the maximum number of people. If we want to create jobs in America, we should look to services, rather than the manufacturing sector. And while it’s hard to create those jobs directly, you can definitely try to do it indirectly, by building the platforms on which those jobs are built. They’re called cities. And America is, sadly, very bad at keeping its cities modern and flourishing. 1950s-era suburbia won’t cut it any more. But who in government is going to embrace our urban future?
Facebook IPO: Three important things from the SEC filing
Facebook filed for an IPO with the SEC late today. I've had a chance to review the S1 document, although I didn't really dig deeply into it. That can come later. The CliffNotes version is that there aren't any huge surprises here, as far as Facebook's financials go. There are over 800 million users. The business is all about advertising, the source of almost all of Facebook's revenue.
So what are the little surprises?
1. Facebook's future hinges on mobile. As plenty of folks have pointed out, pretty much everybody who is going to use Facebook already does — on a computer. This is where the money comes from: advertisers want to reach those people. On mobile devices, by contrast, Facebook doesn't do ads yet. There could be growth here. But mobile could also steal from Facebook's computer-bound business. From the S1:
Facebook files for IPO, Zuckerberg outlines his vision for 'rewiring' us
Facebook waited until the end of the business day in New York to file its S1 papers with the Securities and Exchange Commission — the prelude to what could be the biggest tech IPO of all time later this year.
But who cares about the money? For Facebook CEO Mark Zuckerberg, who's worth about $25 billion, it's all about togetherness. This is from his letter that accompanied the filing (thanks to Nicholas Carlson and Business Insider for the quick breakdown):
We hope to strengthen how people relate to each other.
Even if our mission sounds big, it starts small — with the relationship between two people.
Personal relationships are the fundamental unit of our society. Relationships are how we discover new ideas, understand our world and ultimately derive long-term happiness.
At Facebook, we build tools to help people connect with the people they want and share what they want, and by doing this we are extending people’s capacity to build and maintain relationships.
People sharing more — even if just with their close friends or families — creates a more open culture and leads to a better understanding of the lives and perspectives of others. We believe that this creates a greater number of stronger relationships between people, and that it helps people get exposed to a greater number of diverse perspectives.
By helping people form these connections, we hope to rewire the way people spread and consume information. We think the world’s information infrastructure should resemble the social graph — a network built from the bottom up or peer-to-peer, rather than the monolithic, top-down structure that has existed to date. We also believe that giving people control over what they share is a fundamental principle of this rewiring.
We have already helped more than 800 million people map out more than 100 billion connections so far, and our goal is to help this rewiring accelerate.
Facebook IPO: Will it rescue venture capitalism?
The venture capital business has been under some stress for a while now. It's not that it's doing all that badly. It's just that it isn't doing as well as it has in the past. This is related to the overall weakness in the economy, not just in the U.S. but also Europe: it's tougher for VCs to raise money, and it's tougher for VCs to sell their portfolio companies to established firms or exit their investments via initial public offerings (IPOs).
But that could all change with the much-anticipated Facebook IPO, due to happen later this year.
Or not. This is from Fox Business:
“A little wind may have left the sails after some of the big name IPOs failed to live up to the overblown expectations. VC fundraising challenges are likely to start having a negative trickledown effect,” Tom Rodgers of Advanced Technology Ventures said....
That mixed track record is putting even more pressure on Facebook, which is expected to become the largest Internet IPO on record. Unlike some of the recent Internet companies that stumbled, Facebook has a well-developed business model and an estimated $4 billion in annual revenue, which may pave the way for a valuation of up to $100 billion.
Freddie Mac scandal: It goes on and on...
Jesse Eisinger and a ProPublic co-author, Cora Currier, along with NPR's Chris Arnold, have followed up on their original story about Freddie Mac allegedly betting against homeowners being able to refinance their mortgages. To summarize without getting too deep into risk-mitigation instruments and complex financial jargon, Freddie was using these things called "inverse floaters," and more or them than Eisinger originally reported ($5 billion), to...well, what exactly? Eisinger argues that they were being used to bet against homeowners refinancing out of high interest rate mortgages — a neat trick, given that Freddie could set the refinancing rules.
Some bloggers, myself included, have asked whether this really what was going on. Eisinger posted a lengthy comment on my blog and also Felix Salmon's blog at Reuters, helpfully addressing many of the issues that the debate over the story has raised. Felix fires up his analogy-o-matic and provides a good, simple explanation of what Freddie was up to (it involves, cleverly, a real-estate hook). Ultimately, he agrees with Eisinger: