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« February 2007 | Main | May 2007 »

DDO Roundup - Calvin Klein, Chess, Paul Graham, RSS, NYC Bonuses, Google Maps

* Calvin Klein plans to introduce a new fragrance, "in2u." Here's a quick writeup:

Last year, Calvin Klein went so far as to trademark "technosexual," anticipating it could become a buzzword for marketing to millennials, the roughly 80 million Americans born from 1982 to 1995.

A typical line from the press materials for CK in2u goes like this: "She likes how he blogs, her texts turn him on. It's intense. For right now."

There are two potential conclusions for me to draw here, either: one, that blogging really is a hot phenomenon (in a new sense of the word); or, two, that Calvin Klein has completely had it as a brand. Although the idea that blogging can turn a woman on is appealing, I can tell you from experience, that if it ranks anywhere, it would be last in line amongst hundreds of alternatives. Calvin Klein, far from the hot brand it once was, is now a reliable cash cow for Philips-Van Heusen (PVH), whose stock has been performing phenomenally over the past year.

* "It often happens that a player carries out a deep and complicated calculation, but fails to spot something elementary right at the first move." - Alexander Kotov

* Longtime readers know I respect Paul Graham as one of the finest writers on business and technology out there. This latest piece, his introduction to the book, "Learning from Founders" has many of his great ideas in a short piece. I'm a real believer in the ideas from these paragraphs on productive work places, although I haven't yet put them into practice in my life:

The effort that goes into looking productive is not merely wasted, but actually makes organizations less productive. Suits, for example.  Suits do not help people to think better. I bet most executives at big companies do their best thinking when they wake up on Sunday morning and go downstairs in their bathrobe to make a cup of coffee. That's when you have ideas.  Just imagine what a company would be like if people could think that well at work. [...]

Ditto for most of the other differences between startups and what passes for productivity in big companies.  And yet conventional ideas of "professionalism" have such an iron grip on our minds that even startup founders are affected by them.  In our startup, when outsiders came to visit we tried hard to seem "professional." We'd clean up our offices, wear better clothes, try to arrange that a lot of people were there during conventional office hours.  In fact, programming didn't get done by well-dressed people at clean desks during office hours.  It got done by badly dressed people (I was notorious for programmming wearing just a towel) in offices strewn with junk at 2 in the morning.  But no visitor would understand that.  Not even investors, who are supposed to be able to recognize real productivity when they see it. [...]

In the car world, there are at least some people who know that a high performance car looks like a Formula 1 racecar, not a sedan with giant rims and a fake spoiler bolted to the trunk.  Why not in business?  Probably because startups are so small.  The really dramatic growth happens when a startup only has three or four people, so only three or four people see that, whereas tens of thousands see business as it's practiced by Boeing or Philip Morris.

For some more great work from Paul Graham, check out his archives. I'd also recommend a personal favorite of mine, "What Business Can Learn from Open Source". Classic quote: "Meetings are like an opiate with a network effect. So is email, on a smaller scale."

* Barron's adds RSS feeds; Ed realizes he is a nerd. Barron's just started offering RSS feeds of their content, along with content from the WSJ. I'm speechless, as Barron's was the last major financial publication to not offer feeds. Check it out here. These feeds need work, but they're better than nothing, and they're better than what the WSJ used to offer.

* City Journal is one of the more insightful publications on politics with a pragmatic perspective, even if the material is often uneven in quality and insight. Nonetheless, their perception of NYC's dependency on the uber-elite finance community is an important voice, and Nicole Gelinas' latest piece, "Bonus Boom, But..." is a great example of themes the magazine has published for quite a while:

While [NYC] bonuses are up 23 percent since the boom year of 2000, jobs are actually down 10 percent. Six years ago, Wall Street employed 200,000 New Yorkers. Today, it employs fewer than 180,000, the same number that it employed in 1997.

True, since 9/11, employment in the securities industry has grown robustly—indeed, at triple the employment growth rate in other sectors of the city’s economy. But New York can’t rely on Wall Street to generate a broad base of good middle-class jobs. Each Wall Street position may “create” two additional city jobs and another one regionally, but the employment tends to be in not particularly well-paying restaurants and retail (all those traders and bankers going out to eat and buying stuff). And the high taxes that New York is accustomed to levying on its Wall Streeters deter new investment in other job-creating industries in the city and the state. [...]

The words of one once-and-future mayoral candidate shouldn’t give New Yorkers much confidence that the next mayor will understand how perilously dependent New York is on Wall Street. At a December conference on the city’s taxes, Brooklyn congressman Anthony Weiner, told that 1 percent of city taxpayers pay a full third of income taxes, cracked: “They can afford to pay more.”

* You always knew Google's global map products could be a problem, you just never heard any examples of it. I wonder if Google feels that they adhere to the "don't be evil" mantra when they continue to offer detailed satellite maps of a war zone with US lives at risk. Perhaps Google's "don't be evil" concept is meant in the same sense as it did while I was in university, as in, "don't support the evil American imperialists." I can hardly imagine a company recruiting heavily from top American universities would interpret evil any other way. All this commentary is, of course, inspired by the now very old news that terrorists have used Google maps to hit UK troops.

* I used to be a big fan of Malcolm Gladwell, but critical reviews of his recent work have caused me to reconsider. Check out this Richard Posner review of the book "Blink" from January 2005. Here's an excerpt:

There is irony in the book's blizzard of anecdotal details. One of Gladwell's themes is that clear thinking can be overwhelmed by irrelevant information, but he revels in the irrelevant. An anecdote about food tasters begins: "One bright summer day, I had lunch with two women who run a company in New Jersey called Sensory Spectrum." The weather, the season, and the state are all irrelevant. And likewise that hospital chairman Brendan Reilly "is a tall man with a runner's slender build."

* And, in a perfect example of the dangers of web surfing to the best attempts at time management, check out some fascinating reading on the 2002 Millennium War Games, put on by the Pentagon to demonstrate the superiority of electronic, information-driven war systems. These systems were put to shame by General Paul Van Riper, who outwitted the systems with a variety of low-tech solutions. Van Riper's success pointed to the devastating danger of low-tech determination against high-tech weapons, ending in controversy. Nova has an interesting interview with Van Riper.

As a taxpayer, you should be very concerned that the $300 billion dollars we spend on military equipment each year is probably close to wasted. For example: for all the hubbub about the joint strike fighter, 50% of US casualties in Iraq were the product of the RPG-7, a shoulder-fired grenade launcher developed by the Soviets in 1961. Effective responses to this now primitive weapon: zilch.

For the most compulsively readable interpretation of this exercise, check out the War Nerd. Here's an excerpt from the War Nerd's interpretation:

What van Ripen did to the US fleet...that's something very different. He was given nothing but small planes and ships-fishing boats, patrol boats, that kind of thing. He kept them circling around the edges of the Persian Gulf aimlessly, driving the Navy crazy trying to keep track of them. When the Admirals finally lost patience and ordered all planes and ships to leave, van Ripen had them all attack at once. And they sank two-thirds of the US fleet.

That should scare the hell out of everybody who cares about how well the US is prepared to fight its next war. It means that a bunch of Cessnas, fishing boats and assorted private craft, crewed by good soldiers and armed with anti-ship missiles, can destroy a US aircraft carrier. That means that the hundreds of trillions (yeah, trillions) of dollars we've invested in shipbuilding is wasted, worthless.

60 Minutes on Coal Safety in Harlan County, Kentucky

60 Minutes ran a piece on coal mine safety this Sunday. The piece looked at the spate of recent deaths in Harlan County, and focused on the efforts to improve mine safety by wives of men who were killed in recent accidents. I found the piece interesting, but lacking in substance.

I think the deaths we have seen in mines recently were driven by record coal prices over the past few years, a large amount of formerly dormant capacity being brought online in a short period of time to take advantage of pricing, and greed, by both mine workers and operators, to haul as much tonnage as possible. Everyone in a mine makes more money based on the amount they can take out of the ground, so while owners are generally most culpable, everyone potentially shares some of the blame.

Take a look at the graph below, and notice that the price of anthracite coal (the good stuff) is about as high as it ever has been (non-inflation adjusted) in the past few years.

Coal_prices_1

Source: CRB, through 2004 (sorry, free historical data ain't always up to date)

Looking at current data (last three years) notice that among all the coal regions in the US today, that Central Appalacian Coal (where Harlan County is located) commanded an astronomical price, at least through the middle of 2006. Central Appalachia is also where the accidents have occured:

Coal_3year_1

International Coal (ICO), which owned one of the mines (Sago) that had the worst single accident, was formed just a few years back from a bunch of bankrupt mine operators. The Sago accident exemplifies the challenges the industry is facing right now: upstart firms bringing dormant capacity online to take advantage of record pricing. Harlan County is about a five hour drive from Sago, and both have the priciest variety of coal.

The miner's wives are right to push for mine safety, and I hope they are successful in doing so. My only gripe with the episode of 60 Minutes is the application of Occam's Butterknife to trying to understand why mining deaths have increased lately. With a multi-million dollar production budget, understanding and explaining issues should not be out of the question.

The answer, in short, is that we're in the middle of a bull market in commodities.

Of course, don't expect 60 Minutes to actually interpret the world for you (that's what the DDO is for). With a bunch of touch-feely septuagenarians at the helm, 60 Minutes basically reveals that it is painful to lose a husband in the mines, that mine owners are greedy and camera shy, and that a lawyer fighting this very issue in court will not admit to sh*t.

One plaudit for 60 Minutes is this interesting video from the same segment on how miners actually get the coal out of the ground. Scary, and fascinating. - Ed

Is the world really about to end? or...

Putting market moves in perspective:

Typically, the gap between 2% down days is less than 100 to 300 days.

According to Birinyi & Associates, who tracks this sort of thing, for period ended this past week, the S&P 500 has not had a single day where the index was down more than 2% in about 950 days.

Said another way: we've been in an exceptional stretch of calm. Looking at data back through 1928, the next longest period without a 2% down day ended around 1970, and there have only been five other periods greater than 700 days in about 80 years.

(Check out TickerSense for more info. Data as of Jan 27, 2007.)

Perhaps this week merely reminds us that the market has down days sometimes, too. As a result, I interpret the fear I see all around as a good sign.

Jim Cramer talked about the need to rotate into defensive stocks. The formerly invincible brokers took a mighty beating. China, the country that was supposed to make us all rich, is now the country whose markets will send us to the poor house.

Electronic trading, once viewed as a sign of progress, is now considered a suspect in the decline. Dow Jones revealed that its computers miscalculated the DJIA for 70 minutes. The SEC is taking a look at the performance of the NYSE's Hybrid Trading system. This suspicion about electronic trading comes on the eve of the implementation of the most significant regulatory embrace of electronic trading in a decade, if not ever.

The old saw is that fear of a pullback is the sign of a bull market with room to run. When people view pullbacks as an buying opportunities, that's considered a sign of bear markets to come.

Based on the response to this decline, I still think this market will end the year higher than it is today. - Ed

How to Cook the Perfect Steak

A reader asked about my steak technique, whether there were any secrets. Great question. My present technique is far from perfect, but I'm getting there.

I cook filet mignon or porterhouse. I tried supermarket meat twice, and have decided that it's almost always worth paying a few bucks more for at a specialty market. I season the steak with a healthy amount of quality ground pepper, a little salt and some olive oil. I use a 12 inch non-stick pan, with a little olive oil, heated to the point where the oil is almost smoking. Depending on thickness, I cook the steak on the stove for 2-5 minutes on each side.

The secret, as far as I understand it, is a meat thermometer, so I don't have to cut the steak open to see if its done, and I don't have to guess. The thermometer in itself can almost overcome any errors in technique, no matter what professional chefs may say about losing the juice. A 140 degree steak should get a nice medium rare, but consult the FDA or your thermometer's manual, because I don't need any charges of food poisoning.

Now, I've done some reading on steak technique, and my current understanding is that the ideal method for steak preparation is a combination of stove-top searing and oven heating.

Here's the skinny: pre-heat the oven to 450 degrees, heat a cast-iron pan on the stove. Sear the steak for 2-3 minutes each side on the stove top, and then put the whole pan into the oven until the meat reaches your target temperature (10 to 15 minutes).

I personally like to pair steak with a big red wine, perferably a big California cabernet. Of course, properly decant your wine (3-7 hours).

The WSJ seems to be on the DIY-great-steak train as well. Check out this recipe for the perfectly cooked steak from superstar chef Laurent Tourondel, executive chef and partner of the NYC-based BLT (Bistro Laurent Tourondel) franchise. Notice how similar it is to the recipe I laid out above.

Cooking steak is simple, perhaps embarassingly so. It's almost not worth calling it cooking when it is this easy. Heat pan. Put steak in pan. Flip. Put in oven. Serve.

No man should be without this technique in his bag of tricks. Although I'll continue to enjoy great steakhouses, I'll probably never hold them in exactly the same esteem again. - Ed

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