Monthly Archives: October 2010

Hobbit Staying in New Zealand

Pedra Azul Unfortunately, too few details in this story but it confirms what I said yesterday – that the NY Times had it wrong and late. The conflict over unionization of The Hobbit appears to have been settled but Jonathan Handel is suggesting that terms do not favor the unionization of film industry workers.

http://christineduvivier.com/parents-1/ Hobbit Staying in New Zealand – The Hollywood Reporter.

A Labor Issue Entangles ‘The Hobbit’ – Really? NYTimes Late Again

Where was the Times when this was a labor dispute? Now it seems they are just trying to stir up trouble. As the story indicates, the labor issues have been settled.

A Labor Issue Entangles ‘The Hobbit’ – NYTimes.com.

Iran Is Said to Give Top Karzai Aide Cash by the Bagful – NYTimes.com

Still think we are fighting the “good war” in Afghanistan?

Think again.  (Hat Tip: Pundita)

Iran Is Said to Give Top Karzai Aide Cash by the Bagful – NYTimes.com.

Benoit Mandelbrot, Polymath, Dies at 85

mandelbrotFor me this is very sad and personal news. Benoit and I had become friends over the last several years, having numerous long conversations about the very wrong turn that economics had taken. He was a brilliant and unusual man whose unorthodox career path nonetheless resulted in fundamental contributions to science and social science that will last for many years. Thus, I have edited the title to the Times obituary from “mathematician” to “polymath.”

Our friendship began when he called me out of the blue one day in response to an email I had sent him about the strange approach the U.S. Supreme Court took to the theory of market efficiency. He was amazed to hear that law professors at his own institution, Yale, actually seemed to believe and teach that markets were efficient.

While Benoit is best known to the wider world for his work on fractals (an example, the “Mandelbrot set” is pictured above), it was actually his earlier foundational work on how prices behaved on the world’s cotton markets that I was interested in. In fact, that work helped lay the basis for his discovery of fractals.

He found in his analysis of price behavior that in fact markets could behave in wild and very difficult to predict fashion. Any idea of smooth and continuous markets, the basis of the theory of efficient markets, was foreign to him. He began a lifelong interest in “roughness” that eventually led to fractals. This work alone should have earned Mandelbrot the Nobel Prize in Economics. You can listen to him explain his views here and here.

My current research project on the behavior of stock exchanges was inspired by Mandelbrot’s ideas. In particular, he noted in response to the recent financial crisis that there is an absence of “inertia” at work in the markets and thus the kinds of large price moves we have seen in recent years, up and down, are to be expected.

My co-author Jenny Kuan at the Stanford Institute for Economic Policy Research and I have been trying to determine if, in fact, good institutional design of capital markets can create a kind of “synthetic inertia” that indeed could help establish more reliable exchanges. If so, then we could have a lower cost of capital and perhaps a healthier economy.

We had hoped, of course, to engage Benoit in a discussion of our results. Sadly, that will not happen.

Benoit Mandelbrot, Mathematician, Dies at 85 – NYTimes.com.

Pot, Kettle, Black: Has HP Bought the Wall Street Journal?

Everyone knows that Hewlett Packard is on a buying spree these days, but I had not realized they had set their eyes on the Wall Street Journal.

The other day the Journal’s All Things Digital website slammed fellow business journalist Joe Nocera of The New York Times for an appearance of a conflict related to his columns on the HP CEO fiasco.

But it turns out the Journal’s reporter on the story, Kara Swisher, has her own conflict that she failed to tell readers about. And the Journal now appears to be engaged in a rewriting of the history books to erase any effort to explain this to its readers.

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HP Update: “Conduct Unbecoming A Public Company Board Of Directors”

Remember Spygate, HP’s undercover operation against its own board and journalists? Well, now we have Hurd-gate, according to Mike Arrington at TechCrunch.

Stung twice, first by their abrupt dismissal of star CEO Mark Hurd for what appeared to most people to be a personal failing (his involvement with an HP marketing contractor) and second by their hiring of a failed CEO to lead the country’s largest technology company, the board has now gone on the offensive against business reporter Joe Nocera of The New York Times.

As I noted here a few days ago, Nocera pointed out the hypocrisy of the board for dumping Hurd for relatively minor ethical issues while hiring Leo Apotheker, whom SAP fired after 8 months as their sole CEO (he held a co-CEO position for longer).

Apotheker it turns out was CEO of SAP while SAP was stealing software code from competitor Oracle.

Nocera wrote an earlier column calling the HP board “the most inept in America.”

Unable to make the business case for the hiring of Apotheker, Arrington says the HP directors are going after Nocera instead, first through a guy named Ben Horowitz. Horowitz was CEO of a company called Opsware (formerly LoudCloud) which was chaired and co-founded by Marc Andreesen. Horowitz and Andreesen arranged the sale of Opsware to HP in the summer of 2007 for $1.6 billion. Andreesen eventually got appointed to the HP Board. Horowitz quit HP after a year and he and Andreesen formed a venture capital fund.

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5 Miners Hoisted to Freedom in Chile

Tears certainly came to my eyes as I watched the rescue effort tonight.

I recalled working side by side with an exiled Chilean miner on an assembly line in the late 70s in northern California. A refugee from the Pinochet dictatorship, we worked together in an electronics plant for several months.

I helped him get the job, as a gesture to friends in the Chilean solidarity movement, and he could ill afford to lose it, but when a battle broke out with management – intent on shutting down the plant and shipping our jobs to a non-union state or overseas – he stood with us, without any doubts.

He spoke no English and only a little Spanish, as he was of Indian descent. But we understood each other. There was a toughness about him that I knew you could only be born with.

I am not surprised that his brothers have survived this ordeal.

5 Miners Hoisted to Freedom in Chile – NYTimes.com.

New HP Chair Ray Lane: HP Board Did Not Tell Investors the Whole Story Behind Hurd Ouster

cheap beer lyrics SEE UPDATES AT END.

Apparently the HP Board did not tell investors everything there was to know about the ouster of HP CEO Mark Hurd.

At least that is what the incoming HP Board Chair Ray Lane has told the New York Times in a letter that attempts to explain the ouster. While there was some disclosure by HP that Hurd had fudged expense accounts, Lane now says that that explanation did not give investors the full story. Lane says that Hurd “repeatedly lied” to the Board about his involvement with Jodie Fisher.

Federal securities laws require statements to investors not be materially misleading. If the board knew Hurd had “lied repeatedly” to them it certainly would have made sense to tell investors, the owners of the company, that this was the case.

All that HP said at the time of the firing was that their standards of business conduct were violated, which is so vague as to be meaningless. The market was confused at the time and remains now even more confused about the nature of corporate governance at our country’s largest technology player.

Oh, and why was Lane now revealing this information? Apparently he is embarrassed that the new CEO HP has hired, Leo Apotheker, was CEO of SAP when SAP was stealing IP from competitor Oracle. I guess Lane’s attempt to distract the market from that story is to somehow try to beef up the board’s ouster of Hurd.

Just in case folks are wondering about the role that SAP may have played in the IP theft, SAP has admitted its TommorowNow (SAP TN) subsidiary violated a federal statute against intentional theft of information from a computer.

Claims that SAP itself was involved in this illegal behavior survived “summary judgment” (i.e. an attempt to dismiss the Oracle claim by SAP) because, in the words of the federal judge hearing the case, “triable issues exist with regard to the extent of SAP AG’s and SAP America’s knowledge of the alleged infringement; with regard to whether SAP AG or SAP America induced, caused, or materially contributed to the alleged infringement; and also with regard to the extent of any actual involvement by SAP AG or SAP America in any copying that was performed by SAP TN.”

Normally when a company like SAP loses on a summary judgment motion they will attempt to settle the dispute rather than proceed to trial since otherwise they are leaving matters in the hands of a jury. In fact, SAP issued a public statement after the court’s August ruling saying it would compensate Oracle for the harm it caused. Oracle also won summary judgment on several other issues before the court.

Recall that HP’s new CEO, Apotheker, was a senior SAP sales executive and CEO while SAP TN was engaged in this activity. Yet that somehow was ignored by the HP board in its vetting of him. As I said when first interviewed about this story, the entire HP board should go, sooner rather than later.

UPDATE: The FT reports that Lane does not take office until November 1. One wonders, then, how he is privy to details about the Hurd ouster that investors are not? The FT seems shocked by what it called the “outbursts” and “astonishing public accusations” by Lane.

UPDATE #2: It appears the TN theft may have stopped prior to the elevation of Apotheker to the CEO position. He was at the time a member of the SAP Executive Board, which together with the Supervisory Board is the equivalent of an American Board of Directors, and deputy CEO. The Oracle complaint against SAP includes references to emails indicating that Apotheker was familiar with TN operations.

New York Times: The Hypocritical HP Board

Joe Nocera at the Times takes the board of directors at HP to task for hiring as its new CEO Leo Apotheker who was CEO of SAP when that company admitted theft of key intellectual property assets from major competitor Oracle.

The HP board had some two months ago ousted Wall Street darling CEO Mark Hurd for what appeared to be minor expense account issues, but somehow was so enamored of Apotheker, apparently in part for his minor role as a liason between HP and SAP during his brief and disastrous 8 months as SAP CEO, that they rewarded him a compensation package worth tens of millions.

HP recently tapped the services of hotshot defense lawyer Alan Ruby to go after Hurd when he joined Oracle for the mere possibility that he might, someday, misuse confidential business information for Oracle that he gleaned while at HP. Ruby should stay near the phone – the hapless HP board may need him again to bail their new CEO out of trouble.

The Myth of the Non-State Actor: Taliban/Pakistan Links Clearer

Ever wonder how the US can evade the longstanding principles of international law and use assassination, torture and secret jails to fight the “war on terrorism”?

By creating the myth of what security studies folks call the “non-state actor.”

The idea is that terrorist groups like the Taliban and al Qaeda are somehow capable of organizing a global war against US interests as free standing movements functioning independently of the existing state system. Since in large part international humanitarian law is about how states go to war against each other, it frees states from many constraints when acting against so-called non-state actors.

There is indeed a war of sorts underway against certain aspects of US power on a global level but as this report in the Wall Street Journal indicates that war relies heavily on state support from nations like Pakistan.