Game Theory: Is Predicting Athletic Performance Possible?

It's feeding frenzy time in big-money sports:

Soccer's UEFA Champions' League finalists, Bayern Munich and Chelsea, are getting ready to meet. The US National Hockey League and National Basketball Association playoffs are under way, while the US National Football League annual spring draft of eligible players concludes today.

All of which raises the perennial question about whether all this cash chasing all this performance can somehow be digitized, normalized and analyzed in ways that take the mystery out of who will show up and who will flame out.

Both sides have their adherents. In baseball the quants who follow stats guru Bill James were feted in last year's Hollywood biopic, 'Moneyball.' Skeptics continue to doubt the ability to quantify the intangibles like 'heart,' desire, determination and discipline. Technology has brought us closer to the certainty demanded by the former. But as the following article points out, the imponderables of the human condition suggest that serendipity and wonder will remain. JL

Daryl Morey comments in The Economist:

IN A famous detective story by Edgar Allan Poe, “The Purloined Letter”, a minister steals a letter containing compromising information from a woman and uses it to blackmail her. The police scour every corner of his hotel room in search of the document: they check behind the wallpaper, under the carpets, and even examine the tables and chairs with microscopes, all to no avail. Defeated, they summon C. Auguste Dupin, an amateur detective, to help them with the case. Mr Dupin surmises that the minister would try to outwit the police by leaving the letter in plain sight. He duly spots it tucked into a card rack, delivers it to the authorities, and collects a reward of 50,000 francs.

According to a series of news reports, the C. Auguste Dupin of the National Basketball Association (NBA) this year is Ed Weiland, a driver for Federal Express in Bend, Oregon.

Texas Hold 'Em: Amazon and Lone Star State Reach Sales Tax Deal

If they had actually been playing poker, it would probably have been akin to Texas Hold 'Em.

Both sides wanted to win - and both were bluffing. One caved. And the result is that Amazon's national tax advantage is quickly going to be history.

The issue was, once again - with feeling - that Amazon, now the nation's largest e-retailer with 20% of sales, has refused to collect state and local taxes, claiming it is exempt due to its online provenance. The state and local authorities, eying empty store fronts, disappearing jobs and declining tax revenues think this has gone too far.

Physical retailers, who pay taxes, contribute to the local community and hire local local citizens understandably think Amazon's status is unfair. Especially since the favorable tax treatment was enacted when the net was in its infancy and no one knew how it would come to dominate commercial activity.

The stakes in this stand-off were large. Amazon closed a distribution center with hundreds of jobs in Ft. Worth, Texas while Texas threatened to shut Amazon's sales down in the second largest state of the union. Both had something of significance to lose.

But it was Amazon who folded. The reasons were probably similar to those that caused it to cave in the five other states with which it has reached agreement: ultimately, Amazon makes money by selling. It no longer really needs the tax advantage. That may provide some modest profit enhancement, but they have won the convenience battle with consumers. Other retailers are and will continue to develop an online presence but it is unlikely that any will achieve Amazon's scale anytime soon.

This particular deal has garnered a lot of attention because it IS significant. Three of the other states where it collects taxes are relatively small and do not make much of an impact on sales or profits. Seattle, Washington is where the company is headquartered, so the arguments it used in other venues were irrelevant there. New York is very big, has a powerful retailer industry - and is famously liberal in its politics. Texas, by comparison, is not only large but is both the most politically conservative and business friendly in the US. It had to decide between its pro-business, anti-tax ethos and the fact that home-state constituents were placed at an economic disadvantage. The fact that all politics is local proved more powerful than ideology. With the example of Texas before them, the other 42 states are almost certain to follow quickly.

Amazon's tax advantage is history. JL

Nanette Byrnes reports in Reuters:

Amazon.com agreed to begin collecting sales tax in Texas on Friday, forging a deal that promises to bring more jobs to the southern U.S. state and as the online marketer lost another round in a series of state-by-state sales tax battles.

Amazon rings up an estimated 20 percent of all U.S. online retail sales, making it the country's largest online retailer. Most online purchases are free of sales tax, which has given the company an edge over traditional, bricks-and-mortar retailers that do collect sales tax.

Hollywood Confidential: Industrial Strength Celebrity Hacking

Some of them still think these texts and calls are private.

After all the stories about the British Royal Family, the Murdoch media industry hacks, the revelations of government spying - and even the scripts of the movies in which they themselves have starred.

Or maybe they just think they are immune because they can afford to hire tech consultants who assure them that they are safe. Even as we celebrate the 40th anniversary of Watergate this belief in personal invulnerability persists. Hello! Anyone paying attention out there?

The amazing thing is not that these hacks exist or that they are technologically possible. Hell, we use pretty sophisticated systems when we go to the mall to buy a new flatscreen TV. No, the surprise lies in both the industrial scale of the hacking enterprise(s) - and the degree to which some celebrities become complicit in order to garner publicity - and profit. JL

David Kushner reports in GQ (hat tip Barry Ritholtz):

They've become a part of the pop-culture landscape: sexy, private shots of celebrities (your Scarletts, your Milas) stolen from their phones and e-mail accounts. They're also the center of an entire stealth industry. For the man recently arrested in the biggest case yet, hacking also gave him access to a trove of Hollywood's seamiest secrets—who was sleeping together, who was closeted, who liked to sext. What the snoop didn't realize was that he was being watched, too

Shift Work: US Firms Add Jobs - But Mostly in Other Countries

Nice work if you can get it.

And you can get it if you live elsewhere.

US companies' hiring is up - but their hiring outside the US has increased to a much greater extent. In the past two years, 75% of the jobs these firms have added have been outside the US.

The reasons have primarily to do with the rate of growth in developing nations. If companies are going to establish a strong presence in the economies providing the strongest sales prospects, they must add employees there both to serve the local market more effectively and to underscore their commitment.

The problem is that these policies may be contributing to a downward spiral of incomes and skills development in the US that could, if not corrected, become self-reinforcing. Corporate profits are up and executive compensation, a chronic sore point, has increased unabated. The employment market may eventually benefit from the decline in comparable wages and the availability of certain skills, but the concern is that the overall consumer economy may become so weakened that it will no longer be able to support that growth. JL

Scott Thurm reports in the Wall Street Journal:

Thirty-five big U.S.-based multinational companies added jobs much faster than other U.S. employers in the past two years, but nearly three-fourths of those jobs were overseas, according to a Wall Street Journal analysis.

Those companies, which include Wal-Mart Stores Inc., WMT +0.20%International Paper Co., Honeywell International Inc. and United Parcel Service Inc., boosted their employment at home by 3.1%, or 113,000 jobs, between 2009 and 2011, the same rate of increase as the nation's other employers. But they also added more than 333,000 jobs in their far-flung—and faster-growing— foreign operations.

Be Careful What You Wish For: More Mexicans Now Leaving US Than Entering

Problem solved? Or worsened?

There are many in the US who viewed the waves of immigrants entering the US over the past fifty years - sometimes illegally - as a sign of cultural, economic and social degradation. But the data told a different story. One of the key elements differentiating the US from the rest of the world's economic powers was its magnetic attraction for talented people seeking opportunity.

A recent Pew study reporting that Mexican immigrants are now leaving the US in greater numbers than those arriving is not, as some would claim, the result of tough new anti-immigration measures designed to protect America's borders. It is, rather, evidence of the declining economic opportunities available in the US - and perhaps, especially, for middle class US citizens. Why would that matter to Mexican immigrants, many of whom could take only low wage or low skill jobs? Because it is to that middle class status and security that they aspire. With opportunities for achieving it reduced, so is the attractiveness of the US as an engine of global growth.

While not necessarily a sell signal for the entire economy, it is a warning sign whose flashing is being observed. JL

Guy Garcia reports in the Huffington Post:

There have been signs of the shift for at least a couple of years, but now it's official: the tsunami of immigrants that has flooded the U.S. for the past four decades, and inspired a Noah's Ark mentality amongst xenophobes, Nativists and know-nothings, is receding.

If the anti-immigration alarmism in this country were based solely on the issue of undocumented aliens, as many conservatives claim, you'd be hearing hallelujahs and shouts of joy from the Right. After all, there's not much point in wasting American tax dollars on a wall that will only keep Mexicans from leaving the U.S. Problem solved, right?

Google Spends More Lobbying Congress Than Apple, Facebook, Amazon and Microsoft - Combined.

Worried, are we?

Mr. Page goes to Washington - and he is not doing so quietly. The disclosure that Google is outspending all of its strategic tech rivals - combined - on lobbying Congress and the US government might be greeted by some as a sign of their invincibility. After all, who else has that kind of coin to throw around?

But in DC, this sort of revelation is greeted with knowing smiles. It is, more likely, a sign of weakness. Or perhaps, to put it more delicately, evidence of certain competitive, legal and regulatory 'challenges' that need to be 'addressed.' Former Intel CEO Andy Grove once said that only the paranoid survive.

In this case, it doesn't take much of a search, as it were, to identify the causes of Google's concern. As the tech industry grows, its once easily defined borders become more permeable. Google finds itself competing with rivals including all of its tech confreres, plus the publishing, entertainment and advertising industries - just for starters. It has intellectual property, foreign trade, tax, commercial regulation and privacy issues to negotiate. To address them it must contend with a bewildering array of government entities that cover the spectrum from Justice, Treasury, Commerce, State, FCC (communications), FTC (anti-trust) to Defense and the SEC (securities). The cab fares alone for getting around to those agencies are daunting.

And Google, to its credit, remembers well what happened when Microsoft treated government lawyers' charges of monopolistic behavior with barely concealed contempt. Yeah, that didnt work out too well for the renegades from Redmond.

Playing safely to the current political tides, Google has hired to manage its effort a former Republican congresswoman from New York who is an experienced lobbyist in what denizens refer to as 'this town.' The larger point is that when a company begins to sense slowing growth, growing competition, increased regulatory scrutiny - or some combination of the three - it tends to cast aside its previous disdain for Washington (focused, as it has been, on 'organic growth') to concentrate on protecting whatever assets it still has. JL

Nicholas Perlroth reports in the New York Times:

With Congress and privacy watchdogs breathing down its neck, Google is stepping up its lobbying presence inside the Beltway — spending more than Apple, Facebook, Amazon and Microsoft combined in the first three months of the year.

Google spent $5.03 million on lobbying from January through March of this year, a record for the Internet giant, and a 240 percent increase from the $1.48 million it spent on lobbyists in the same quarter a year ago,

Honesty as a Competitive Advantage: Extreme Transparency Requires Extreme Trust

Technology has made the world more transparent but less predictable.

It has also made trust easier to verify but harder to find.

The implication, as Don Peppers elucidates in the following article, is that companies concerned about extending their brand or reinforcing their reputation will have to transition from exploiting customers to defending their interests. With so much information available to so many at so little cost, returns to secrecy, where it can be found, have receded. Transparency is the order of the day because with everyone using similar - if not identical hardware, software, platforms and channels, the costs of trying to hide are outweighed by the advantages of sharing. Some executives will take umbrage at the notion that they take advantage rather than add value. But the harsh reality is that many current growth, compensation and promotion systems are based on formulas that favor a Darwinian 'buyer beware' approach to success.

The alternative is that in a networked world, competitive advantage will accrue to those who proactively assert their customers' interests. By doing so, the reasoning goes, companies that practice a more - dare we say it - ethical approach will encourage their clients to spend more money and generate greater profits for those they trust. From app designers to health care dispensers to credit card providers, the model works. Now, if business can just get past its own mistrust. What a concept. JL

Don Peppers comments in Fast Company:

In the 1970s a man won the Spanish lottery with a ticket he’d specifically chosen for its ending number of 48, as recalled in Stanley Meisner's The Drunkard's Walk. Very proud of his “strategy” for winning, he explained: “I dreamed of the number 7 for seven straight nights, and 7 times 7 is 48."

As thinking creatures, we are all masters of pattern recognition, and we see the world around us in a cause-and-effect way, whether interpreting lottery winnings or a business success. Unfortunately, the world is inherently, marvelously, not predictable, so despite its evolutionary advantages, our talent for pattern recognition and cause-and-effect reasoning, along with our natural human biases, can easily undermine our rationality and taint the way we interpret things. In business, most managers are biased to believe the effects they generate through their own actions are greater than they really are. Almost 90 percent of Chief Marketing Officers, for instance, believe that customers trust their own company’s brand as much as or more than they trust competitors’ brands!

Austerity Awry: Keynes' Comeback

Citizen-consumers' strange flirtation with the joys of austerity appears to be waning.

Strange because the policies employed to enforce the austerian ideology require a degree of self-sacrifice that runs counter to almost every salient human instinct. It did not help that from the UK to France to Ireland to Spain to Portugal to Italy to Greece - and so on - the expected benefits have failed to materialize while the expected burdens have been manifest. Or that those widely considered most responsible for the financial crisis and recession - the financial services industry - seem not to be sharing the popular discomfort.

Elections do provide a useful forcing function when it comes to policy formulation and this year is proving no exception. With the plurality gained by French Presidential hopeful Francois Hollande, the European austerity consensus may be shattering. Putting aside national historical allusions (and delusions) to Germany versus southern Europe, the question is how much people are willing to suffer for an idea. Especially one that does not appear to be working as promised.

The answer appears to be, not as much as the current regimen requires. It turns out that global financial stability or the threat of its disappearance is not as compelling as the threat of a lost job and home. Which is hardly a surprise. Further tests await in China and the US, as their government transitions or elections loom. The Bo Xilai scandal in China reflects some of these tensions. The verbal civil war being waged in the US places them front and center. Ultimately, what civilization is learning - again - is that the success or failure of a policy depends to a great extent on perceptions of efficacy and fairness. Not, perhaps, a bad set of standards to emulate. JL

Henry Blodget comments in YahooFinance:

The news is that Europe may finally be beginning to soften on the "austerity" philosophy that has brought it nothing but misery over the past several years. The "austerity" idea, you'll remember, was that the huge debt and deficit problem had ushered in a "crisis of confidence" and that, once business-people saw that governments were serious about debt reduction, they'd get confident and start spending again.

That hasn't worked. Instead, spending cuts have led to cuts in GDP which has led to greater deficits and the need for more spending cuts. And so on.

Operators Are Standing By: The Latest Prices for Cellphone Wiretaps

In the battle between privacy and convenience, society voted with its thumbs; convenience won going away.

The overwhelming cultural acquiescence to technology's benefits has also provided governments with the opportunity to expand their desire for more information. Their goal is to better serve and protect, though the emphasis in the post 9/11 era appears to tilt strongly in favor of the latter.

We have become accustomed to the notion that someone may be listening or downloading our cellphone conversations, email and text communications. The Rupert Murdoch News Corp revelations about commercial and police interactions have only shocked to the extent that the breaches were so pervasive - and petty.

But there is another element to the business side of this process, which is that requests for wiretaps have become so common that the telecom companies have developed price lists for the service. Yes, the telcos do not offer this service for free in order to do their patriotic duty. They make money the old-fashioned way, by charging for their time and effort. It is not exactly clear whether the rates are fair or exorbitant. Nor is it apparent whether the government wiretapper-ocracies have tried to negotiate for better deals or even volume discounts. But it is now clear that eternal vigilance does, indeed, have a price. And that the tax dollars (or euros or whatever) of those being tapped are being used to pay for the privilege. JL

Andy Greenberg reports in Forbes:

If Americans aren’t disturbed by phone carriers’ practices of handing over cell phone users’ personal data to law enforcement en masse–in many cases without a warrant–we might at least be interested to learn just how much that service is costing us in tax dollars: often hundreds or thousands per individual snooped.

China Offshores Manufacturing...To the United States

Cheap skilled labor. Local governments eager to deal. And the ability to skirt anti-dumping tariffs. What's not to like?

The world's largest market for consumer goods is anxious to lure business and create jobs. The world's largest producer of such goods is concerned about rising manufacturing costs at home, growing US frustration with a flood of imports that undercut domestic producers - and wants to establish itself as a global economic power. It's a match.

Ironies abound. Some of the states with the most determined initiatives to lure foreign-owned businesses are those, like Alabama, that also have the harshest anti-immigration laws. As Daimler-Benz discovered when one the German executives assigned to its Mercedes manufacturing plant there was arrested for not carrying proper documentation. But hey, money talks, the occasional slip up notwithstanding.

Research suggests that many of the Chinese companies relocating operations to the US are concerned about the financial impact of anti-dumping laws. Which means the laws are having an effect. However, it is not clear that encouraging Chinese companies to locate in the US, thus making US companies even less competitive was the intended effect. But at this point, we'll take what we can get. JL

Parija Kavilanz reports in CNNMoney:

Chinese conglomerates, on a mission to expand their global footprint and avoid "anti-dumping" tariffs, are shifting more of their production to America.

In the United States, cash-strapped states desperate for revenue and jobs, are rolling out the welcome mat for foreign companies that can guarantee both.

Follow the Money: Walmart Mexico, Washington Lobbying and Reputation Ripples

Bribery in Mexico - and in Washington?

'When will they ever learn.' That was a lyric in a saccharine 1960s Peter, Paul and Mary tune called "Where Have All the Flowers Gone?"

But it seems a fitting, if unfortunate, anthem for Walmart. Having expended tens of millions of dollars in a gargantuan - and largely successful - effort to get past their reputation for employee abuses, environmental problems and competitive ruthlessness, the company falls prey, once again, to a scandal involving violation of laws and perhaps more importantly, public mores.

The story captured headlines for a few days and then seemed to be fading. Which the unsophisticated might have thought was good news for the company. More astute observers noted that sadly, for Walmart, stories about its misdeeds no longer shock, or even surprise. And then it got worse. The Washington Post reports that during the period when the bribes were allegedly being paid in Mexico, Walmart funded and led a major lobbying effort to weaken US anti-bribery laws.

The legal and reputational implication is that this was part of a corporate strategy aimed at global expansion. A decision had been made, investigators might conclude, that the key to gaining market share in developing nations required bribing officials. In order to lessen the potential liability, Walmart then worked assiduously to eliminate or eviscerate the relevant US legal statutes.

If this connection can be established, it suggests intent, meaning that the civil and criminal penalties may increase significantly. This could impact the tenure of the company's leading executives and, perhaps, its board of directors. In addition, this makes the global cost of doing business higher as every official in every country prone to corruption will now expect equal treatment from a company known for its willingness to engage in 'pay to play.' Others looking for reasons to support their opposition to Walmart expansion have been handed an excuse. Walmart executives who serve on other public company boards such as Eduardo Castro-Wright are already 'resigning' those directorships (under gentle, but firm, pressure) so the reputation stain does not spread.

As if we need to be reminded, in the internet age, especially post-recession, nothing stays secret for long. And the resultant reputation ripples can eventually become tsunamis. JL

Tom Hamburger, Brady Dennis and Jia Lynn Yang report in the Washington Post:

Wal-Mart, the giant retailer now under fire over allegations of foreign bribery in Mexico, has participated in an aggressive and high-priced lobbying campaign to amend the long-standing U.S. anti-bribery law that the company might have violated.

The push to revisit how federal authorities enforce the statute has been centered at a little-known but well-funded arm of the U.S. Chamber of Commerce where a top executive of Wal-Mart has sat on the board of directors for nearly a decade.

Internet Advertising Click-Through Rates May Matter Even Less Than We Already Thought

Nonexistent?

Yup, nonexistent is pretty definitive.

That's what the latest study on the efficacy of click-through rate says is the conversion percentage for those who click through to see about purchasing a product.

But there are those who disagree, or think the study is trying to make a particular point that benefits another type of analysis, or believe the metrics would be different if other variables were adjusted.

The real problem, from our standpoint, is that almost 12 years after the dotcom boom and bust, we still do not have a universally accepted set of comparable data to measure the impact for, arguably, one of the most basic numbers in digital commerce. And that's just for starters. Who's in charge here?

That is exactly the problem. No one is. And the competing interests can not agree. Some advertisers want to use whatever metrics make their sales look best. Some agencies want to support whichever service will generate the largest fees for them. Some techies want to promote the net as the preferred advertising and sales platform. So, lots of people have a vested interest in this outcome and their means of achieving objectives do not necessarily overlap. It is the democratic, capitalistic way. And a potentially huge business opportunity for whoever can convince everyone else that they have a solution. But you knew that. JL

Jason del Rey reports in Advertising Age:

We already know that click-through rates on online display ads are abysmal. Now a study from the startup Pretarget and ComScore revealed that even when a user clicks on an ad, the correlation between that click and a conversion is virtually nonexistent.

Alone Together: The Flight from Conversation

In the face of 24/7 connectivity some claim that we preserve our privacy by keeping the world at our fingertips. Literally. By texting rather than talking.

Others, Sherry Turkle prominently among them, disagree, arguing that we have sacrificed human contact for the narcissistic benefits of technological distance.

There is not likely to be agreement about motives, consequences or impacts. But there is, thankfully, a full-throated debate about what it may mean, why we should want to understand it and what we may want to do about it. JL

Sherry Turkle comments in the New York Times:

WE live in a technological universe in which we are always communicating. And yet we have sacrificed conversation for mere connection.

At home, families sit together, texting and reading e-mail. At work executives text during board meetings. We text (and shop and go on Facebook) during classes and when we’re on dates. My students tell me about an important new skill: it involves maintaining eye contact with someone while you text someone else; it’s hard, but it can be done.

When Too Big Is Too Bad: Is It Time to Harvest Apple Stock?

Oh, no. Not another one of THOSE articles.

You know, the 'whither Apple; is it overpriced, underpriced, about to explode, about to collapse' tilt-a-whirl to which customers, investors, suppliers and soothsayers have been subjected for, well, just about forever.

No, the latest issue may not be apparent to those beyond a small-ish circle of market watchers. The concern is that Apple now comprises over 4% of the S&P equity index. That does not seem like a large number by itself, but in the universe of stock market averages it is enough to literally move the entire market. On some days little ol' Apple can affect the direction of the broadest market indices.

How totally cool. And how utterly scary. Not because there is anything wrong with Apple: it's price-earnings ratio is reasonable, products are iconic, growth prospects believable. But because any company's stock performance, having achieved that degree of size and influence, tends not to be sustainable, those concerns now affect Apple.

The challenges are that 'concentration risk,' or the ownership of the stock in too few hands, makes it susceptible to uncertain swings. And markets abhor uncertainty. The other issue is that historically, growing to this size tends to be an effective long term sell signal. Other tech behemoths who have hit Apple's place in the stratosphere: Microsoft and Cisco...

So, cheer them on. Buy their stuff. Exult in the triumph of the digital David over the gimmicky Goliaths. But remember that for many others, investing is a rational business not an emotional entertainment. JL

Ben Levisohn and Joe Light report in the Wall Street Journal:

How do you like them apples? Investors got a scare on Monday when Apple, among the best-performing stocks of 2012, tumbled 4.2%, capping a five-day stretch during which it lost 8.8%. The stock continued its slide later in the week, finishing Friday down 10% from its all-time high.

You didn't have to own a single share to feel the pain. That is because Apple, the largest public company in the U.S., now makes up more than 4% of the Standard & Poor's 500-stock index and almost 18% of the Nasdaq-100. On some trading days, Apple alone can determine whether broad stock indexes are up or down. On Monday, for instance, the Nasdaq fell 1.1%, while the Dow Jones Industrial Average, which doesn't include Apple, rose 0.6%. On Friday, Apple fell 2.5%, sending the Nasdaq down 0.4% even as the Dow rose 0.5%.

You Eat What You...What? 50% of New College Grads Are Unemployed

It's graduation season. A joyous time when fittings begin for medieval-looking caps and gowns, sales of Dr. Seuss's "Oh, The Places You'll Go" hit their annual high and well-meaning relatives proffer useless advice.

Moving back in with mom and dad, once a rarity in the US, is now such a cliche that it has spawned Hollywood movies and TV sitcoms. In 1967, Dustin Hoffman's break-out movie role in "The Graduate" epitomized the youthful disdain for adult compromise when the actor playing his uncle portentously says, "I just want to say one word to you, young man: plastics."

Now? If only.

The problems are many and varied. University and college attendance is now approaching 50% of high school grads, versus closer to 25% a generation ago. That, of course, was driven by the export of factory jobs overseas. Now the jobs for those with college degrees are migrating as well. Women have embraced higher education with a vengeance and now outnumber male undergrads. With a slow economic recovery and even slower hiring, employers can pick and choose. Experience is preferred, which means unpaid internships for those attempting to work their way into the workforce. And just to make the pressure even worse, total US student debt has now hit the $1 trillion mark.

The law of markets suggests that the supply of inexpensive - dare we say desperate - educated job seekers will eventually create more demand. In the interim, there used to be public sector solutions, but stimulus is currently out of favor and government jobs are being cut in reaction to tax revenue declines driven by, well, you get where this is going. It is worth noting that revolutions are often started by young people whose ambitions are thwarted. Dont say we didnt warn you. JL

Hope Yen reports in the Huffington Post:

The college class of 2012 is in for a rude welcome to the world of work.

A weak labor market already has left half of young college graduates either jobless or underemployed in positions that don't fully use their skills and knowledge.

Larry, Moe and Curly? Why Facebook Just Bought Microsoft's Recently Purchased AOL Patents

Ok - this could be one of two things: a brilliantly conceived strategic repositioning managed simultaneously by three companies working in concert.

Or a promotional gambit for the new Three Stooges movie.

When we last saw our protagonists, Microsoft had bought @ a billion dollars worth of AOL patents, while Facebook had bought Instagram. But that was so last week.

This week, Microsoft has sold some of those patents to Facebook for $550 billion. AOL retains an interest in the patent use no matter who the owner is. So Facebook, Microsoft and AOL all own licenses to the same 650 patents. And Instagram, as of this writing, has stayed bought.

Inquiring minds want to know who is doing what to whom.

One suspects that they each are protecting core interests, hoping to gain a bit of advantage and thwarting the ambitions of a hated rival. Facebook wants to dominate social and is battling with Yahoo. Microsoft is concerned with Google's next move and is looking for some competitive juice. AOL is just hoping to survive til next month. Facebook had been outbid for the AOL patents by Microsoft so grabbed some of what it wanted in the aftermarket.

A fairer description of this set of transactions is three-dimensional chess. But even that sounds like something with which Moe, Larry and Curly could have fun. JL

Carl Franzen reports in TPM:

Facebook just can’t stop making news in the run up to its initial public offering: On Monday, the world’s largest social network announced that it was purchasing 650 various software patents for a cool $550 million in cash from Microsoft, which had in turn just purchased those very patents, plus hundreds more, from AOL.

The game of patent hot potato also nets Facebook a license to all the remaining Web software patents that Microsoft agreed to purchase from AOL for $1.056 billion in cash.The news comes at an especially interesting time for Facebook given that the company spent a cumulative $1 billion in cash and stock on buying the popular smartphone photo-editing and sharing app Instagram two weeks to the day prior.

Sweet: Nestle's $11.85 Billion Pfizer Deal is Buying Growth in China

Sometimes a deal is just a deal.

And sometimes it's not.

Nestle's acquisition of Pfizer's infant nutrition business is an attempt to buy access to the demographic facts of life. Population in its traditional European and North American markets is plateauing. In the emerging markets of Asia, South America and South America, however, the baby business is booming. China alone would probably be worth the price, but adding the others sweetens the deal, as it were.

Given its core product categories, Nestle is in a position to graduate its consumers - and their parents - from infant formula to chocolates and related offerings. The cost of migrating a customer up your value chain is minimal versus having to reintroduce yourself to them and then attempt to make the sale all over again. Already a major force in this category, the acquisition seals its dominance.

Pfizer, which has struggled, benefits by having the cash to refocus its strategy from non-core areas to its central pharmaceuticals business. The efficient market theory chalks another win. JL

The Associated Press reports via Business Insider:

Swiss food and drink giant Nestle SA announced a deal Monday to acquire Pfizer Inc.'s infant-nutrition business for $11.85 billion in a bid to boost sales in emerging markets.

The company based in Vevey, Switzerland said the acquisition would "enhance its position in global infant nutrition" because 85 percent of the Pfizer Nutrition unit's sales is in emerging markets, many of which have large, fast-growing populations.

Too Big to Fear: How the Major Banks Are Going to Fail

Some pigs are more equal than others..

So said George Orwell in 'Animal Farm.' But then they are not. And, yes, that is a problem.

Simplistic? Of course! Controversial? You bet! Overblown? We would not wager the mortgage money on that (assuming there is any left).

The outrage aimed towards the financial services industry continues unabated. At least in the public mind. Governments continue to argue that protecting access to capital is a sacred duty and the key to economic stability, but the markets do not appear to share their concern. The forces that ended the conglomerate craze are turning on the banking industry. And what they are seeing is causing them to ponder alternatives.

The 'pig feed' as it were, were the mortgages on which the banks feasted from 2001-2007. There origination fees were minimal but their profits were maximal. That opportunity is gone. Tougher capital requirements, instituted to avoid reprising the 2008 collapse of the 'exotic financial innovations' market has dried up another toothsome source of income. In short, the basic economics that created these institutions are changing and investors are noticing.

So the fail, when it comes - according to this point of view - will be due to market insistence. The result will be a flurry of mergers, acquisitions and IPOs. From which many in the industry will benefit. You eat what you kill. JL

James Puplava interviews Chris Whalen in Financial Sense:

In a riveting interview on the banking industry, Christopher Whalen of Tangent Capital Partners in New York joins Jim on Financial Sense Newshour to discuss the fallacy of "too big to fail," conflicts of interest in the derivatives markets, problems with the 2005 bankruptcy laws, and why politicians let MF Global investors get taken.

Why CEOs Do Not Run the World

It's mostly been a US phenomenon. But other countries are getting into the act.

In nations like Thailand, and even Russia, oligarchs are declaring their political ambitions. In the US, it is a virtual art form, with successful businessmen (and the occasional woman) regularly deciding that their commercial accomplishments qualify them to run for office. Sometimes with the intention of running an entire country.

This is not to say that they are any more or less capable than the garden variety career politician. But as the following article points out, CEOs' training, experience and possibly their personality types represent a less holistic preparation for the role of governing than they might imagine. JL

Simon Kuper comments in the Financial Times:

Just before the US invaded Iraq in 2003, I was debating the matter over brunch with a friend who is a multimillionaire entrepreneur. “Of course we should invade,” he said. “The Middle East can’t get any worse, so if you change something, it’s bound to get better.”

I don’t know what surprised me more: the weirdness of his argument or his certainty in expressing it. He was suffering from what I now know as the “CEO fallacy”: the belief that if you have run a successful company, you can run a country.

MVP: How Much Is a Good Central Banker Worth?

Cliched sports analogies abound in business. But when it comes to managing a nation's money supply, the world's central banks might do well to follow the lead of the premier professional athletic leagues in soccer, football, ice hockey, basketball and baseball.

What they have in common (ok, jokers, aside from performance-enhancing drug abuse and extramarital distractions) is their unwavering commitment to finding the best available talent anywhere in the world. All of the professional sports leagues mentioned scour the globe for whoever is superior - and then reel them in with substantial pay and the promise of fame. Even the US National Football League, arguably the least global of the bunch, has a substantial - and growing - number of Samoans, Tongans and Nigerians.

As the accompanying chart indicates, the difference between an exceptional central banker and a merely competent one can be measured in trillions of whatever currency suits you. JL

Matthew O'Brien comments in The Atlantic:

Great Britain gets a lot of things wrong, like dentistry and spelling. But here's something they get right: They're willing to poach the best central bankers from around the world for the top spots at the Bank of England.

The UK is hardly alone on this. They're just particularly aggressive about it. Their latest target is Mark Carney, the current chief of the Bank of Canada. Before that, though, they snatched up American economist Adam Posen -- an expert on Japan's lost decade -- to serve on their monetary policy committee. You've heard of an international market for superstar soccer players and Olympic coaches. This is an international market for superstar central bankers.

Satisfaction: Disney's Customer Consulting Business Takes Off

Sell what you know.

If there is anything for which the Walt Disney company is known, how to manage the customer experience is it. From movies to parks to retail stores, the company has established an iconic reputation for making its 'guests' so comfortable that they spend more than they intended - and walk away seeming genuinely pleased about it.

Having applied this knowledge to improving its own business, Disney was surprised - and then gratified - to discover that other companies began asking if it would teach them how they do it. And would be happy to pay for the privilege. Business has doubled over the past three years, in the depths of the worst recession in recent memory, because institutions like hospitals, school boards and the National Football League understand that the competition for attention and revenue has become more intense and complex. Disney is not just competing against other adventure parks, but against video games, athletics and cultural misunderstanding.

In the post industrial economy the availability of good data from technology will sharpen every vendor's instincts for product and service. But only those who can convert knowledge into effective execution will prevail. JL

Brooks Barnes reports in the New York Times:

Maryland teachers were instructed to engage children by crouching and speaking to them at eye level. Chevrolet dealers were taught to think in theater metaphors: onstage, where smiles greet potential buyers, and offstage, where sales representatives can take out-of-sight cigarette breaks.

A Florida children’s hospital was advised to welcome patients in an entertaining way, prompting it to employ a ukulele-playing greeter dressed in safari gear. These personal service tips came from the Disney Institute, the low-profile consulting division of the Walt Disney Company.