Only slightly bent

Yesterday, YLE (Finnish Broadcasting Company, recipient of our TV license fees) chief Mikael Jungner caused yet another stir by wanting to take a peek at the subscriber databases of all the for-pay TV channels to cross-check with the payers of the TV license fees. It was also noted that the Helsinki area has relatively more people without a TV license than most other areas.

Without going too deep into discussing how idiotic this is on many levels – I mean for one, how stupid is it to publicly demand to get access to the competitors’ subscriber databases?! – I was reminded of the following photograph of a great situation which is one of the few cases I’ve ever seen where defacing an advertisement of sorts is justified and even funny as heck. The photographer is unfortunately unknown.

Indeed.

(disclaimer: I don’t have a TV and thus I don’t have a license.)

Hmm, looks like it’ll be the second Google-post in a row. Well never mind that, ’cause this is cool: Google Maps Mobile now uses cell ID in addition to GPS to show location information.

Technologically, there’s not much new about this. After all, cell ID databases and services have already been available in many different places for some time.

What is new, however, is that it works on a previously existing, already useful service: Google Maps Mobile. Even in Finland. On a phone without GPS, Google Maps successfully (well I call it a success anyway) identified my location within 100m: see screenshot on the left.

Now, what are the immediate ramifications of such a thing being widely available? For one, you get your approximate location on devices that don’t have GPS or when you’re out of GPS coverage. From a user point of view, that’s pretty neat. From an operator point of view, it’s not so neat – one of the key assets on the operators’ incredibly shrinking list of key assets is the location of their customers.

Or, wait, was.

So clearly at least some of the operators are bound to fight back. In fact, there has been talk – let’s call them rumors – that some operators are already randomly shuffling their cell IDs to screw with the “unofficial” location services such as this. Now is doing that lame? You bet it is. Is it protectionism? Yes, but curiously of a resource the operators themselves are not utilizing to any significant extent. Does it create additional badwill towards operators? Lots.

Is it, in the longer term, futile? Most definitely.

To get the updated Google Maps, direct your mobile browser to http://www.google.com/gmm/

Google diversifying to other projects from their cash cow, search advertising, is nothing new per se. With all the cash and the great market valuation that they have, Google can afford to have lots of services and projects that don’t really directly generate any revenue to them. A lot of these services have been quite neat and useful for the consumers – like Google Earth for instance. But now their newest diversification strategy is taking them into a completely different ballgame; energy production.

You have to hand it to Google, they’re not lacking in ambition. Check out the press release from yesterday:

Google (NASDAQ: GOOG) today announced a new strategic initiative to develop electricity from renewable energy sources that will be cheaper than electricity produced from coal. The newly created initiative, known as RE<c , will focus initially on advanced solar thermal power, wind power technologies, enhanced geothermal systems and other potential breakthrough technologies. RE<C is hiring engineers and energy experts to lead its research and development work, which will begin with a significant effort on solar thermal technology, and will also investigate enhanced geothermal systems and other areas. In 2008, Google expects to spend tens of millions on research and development and related investments in renewable energy. As part of its capital planning process, the company also anticipates investing hundreds of millions of dollars in breakthrough renewable energy projects which generate positive returns.

Full press release here. Can you imagine any other ICT-company sending out such a press release and surviving the ridicule and skepticism?

I hope they pull it off and that RE<C will be wildly successful.

My main mobile device is a Nokia N80, a “multimedia computer” that, at two years old, can soon be considered ancient. By far the single best feature of that phone is the web browser. Now lately I’ve been testing some of the newest N-series devices and many things have definitely improved. However, to my dismay, the most important thing – the browsing experience – has actually taken a step backward.

There’s a very simple reason to it, too: lower screen resolution. Despite the physically smaller screen, the N80′s resolution of 352 x 416 trumps the larger displays of the latest N-series models as they have QVGA displays of 320×240. The QVGA displays are gorgeous to look at, wonderfully bright, physically bigger and all that – but have fewer pixels. Much fewer.

The difference? The N80 has a whopping 90% more usable screen real estate than the newer models. This is a big difference, borderline crucial difference. Check out the below screenshots to get an idea. The left column is from a new N-series device (N73, N76, N81, N82 and N95 all have this screen resolution) while the right column is from an N80. Click to view the full screenshots:

(Note that the bigger image is from the screen that is physically smaller)

Even though I no longer have 20/20 vision, I appreciate the higher DPI of N80 a lot. Instead of lowering the DPI and increasing the screen size, I want the same great DPI of N80 on a physically bigger screen. Then we can start talking about improved browsing experience.

Next up on my reading list was a book that I had long planned to read but only now got to it. Freakonomics: A Rogue Economics Explores the Hidden Side of Everything is a book that has no unifying theme – the authors are the first to point this out. As such, I also find it a bit hard to describe; it takes a refreshingly different economic look at a wide variety of everyday things and finds surprising and compelling answers to many of life’s questions, large and small. Two things make this book unique in a very good way. First, the problems that are looked at and second, the way they’re looked at.

The kind of questions Levitt & Dubner set out to answer are, in a word, fascinating. Now I know I have a habit of finding many kinds of books fascinating but I must say that Freakonomics was fascinating in its own class entirely. For example, questions like “What do schoolteachers and sumo wrestlers have in common?” are just irresistible. Or consider some other examples: What do real estate agents and the Ku Klux Klan have in common? How does a child’s name affect his or her future success? Can money affect election results? What made the crime rate fall in the US in the 1990s?

I mean come on, could you think of more intriguing questions? From the introductory chapter’s teaser that crime rate fell because of legalized abortion twenty years earlier, I was instantly hooked. Some topics discussed, such as why drug dealers live with their mothers (answer: the vast majority of them are so poor they can’t afford to do anything else) may not be directly relevant to your daily life, but others are very much so – like what makes a perfect parent and how real estate agents really work.

One of the most gripping cases was the one dealing with the huge drop in crime rate in the US in the late ’90s. Like many others, I too had been under the impression that the impressive fall in crime in New York City (and elsewhere) in the 1990s had to do with the broken windows-policies and other deliberate interventions taken. This does not, however, seem to be the case. The following are the reasons most often offered as explanations for the drop in crime rate, all of which sound believable enough:

1. Innovative policing strategies
2. Increased reliance on prisons
3. Changes in crack and other drug markets
4. Aging of the population
5. Tougher gun control laws
6. Strong economy
7. Increased number of police
8. Others like increased use of capital punishment, concealed-weapons laws, gun buybacks etc

Levitt & Dubner then methodologically look at each of these explanations. Without going into detail, it turns out that most of these measures had little or no impact on the crime rate. Some – like increased number of police – were effective, but nowhere near as effective as the drop in crime rate would’ve indicated. All of them combined could not even begin explain the witnessed drop. Instead, a brilliant connection is made to a topic that initially may seem far-fetched; Roe vs Wade in 1973, a famous abortion case at the Supreme Court, after which abortion became widely legal. After Roe vs Wade, millions of abortions were performed. And, it turns out, people most likely to have abortions were people who would’ve provided such upbringing conditions for their children that would’ve made them far more likely than average to become criminals when grown up.

Crime was falling because many of the prospective criminals of 1990s simply weren’t born. Despite the somewhat gruesome reason, the argument is an exceedingly strong one, not least because of its simplicity – and, remember, none of the other reasons so touted for the fall were even nearly effective enough to be responsible.

But Freakonomics is not a book just about intriguing case studies, though the backbone of it does consist of fascinating cases such as the above. It’s also a book about, among other things, the power of information, information asymmetry and the diminishing authority of “experts”, the immense impact incentives have on peoples’ behavior (and the propensity for people to cheat when those incentives are misaligned) and conventional wisdom – or rather the lack of wisdom therein. A few well-known but rarely remembered points are also driven home, again: for one, the fact that risks that kill are very different from the risks that scare us and thus end up getting all the attention.

Freakonomics is a real page-turner and easily one of the most interesting books I’ve read. It’s well-written, at times laugh-out-loud funny and never boring. The topics discussed may not all be earth-shatteringly significant, but they’re wonderfully real, applicable and have a distinctive eye-opening capability – you’ll never look at your world the same way again, and you’ll never again quite so easily believe all the “common sense” things you hear or the “expert” explanations of things. That is a very good thing, so I’d highly recommend Freakonomics if you’re interested in how many small and big things in the world work and why they work the way they do.

I was pleasantly surprised that I found another book on my wishlist from the local library; The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else by Hernando de Soto asks the very important question in its title. The answer, thus far, has been very elusive but The Mystery of Capital sheds some significant light on it. It turns out that property is one of the key aspects, but it’s equally important to realize that property is so much more than just the physical stuff. In fact, it’s primarily a representational system. Much of what we have been accustomed to in the Western world – say, owning our home legally – is next to impossible to accomplish for the majority of people in the developing countries and this is one of the root causes of the problem.

If we start from the end of the book, both the problem and the answer to it can be summed up in the following six steps. Before you start arguing against these points, read the book. These are just the concluding words of of this brilliant work and I’m hardly doing them justice repeating them here; still, they give some important points to think about.

1. The situation and potential of the poor need to be better documented
2. All people are capable of saving
3. What the poor are missing are the legally integrated property systems that can convert their work and savings into capital
4. Civil disobedience and the mafias of today are not marginal phenomena but the result of people marching by the billions from life organized on a small scale to life on a big scale
5. In this context the poor are not the problem but the solution
6. Implementing a property system that creates capital is a political challenge because it involves getting in touch with people, grasping the social contract and overhauling the legal system.

The amount of property held extralegally in developing countries is nothing short of stunning; it’s estimated to that the total value of the real estate held but not legally owned by the poor in the Third World and former communist nations is at least $9.3 trillion. That, unless you can tell, is a lot of money – a LOT of money. It’s about twice as much as the total circulating US money supply, and all that is dead capital that cannot be utilized the way formalized legal property could (by e.g. securing the interests of other parties as collateral for mortgage or by assuring the supply of other forms of credit and public utilities).

You may ask that why, then, is all that property extralegal? Why don’t the people simply legalize their property? Because the system’s broken and they can’t do that, that’s why. Just one example: to obtain legal authorization to build a house on a state-owned land in Peru takes six years and eleven months and 207 administrative steps in 52 different government offices! To obtain a legal title for that piece of land takes 728 steps.

And Peru is not a bad exception among the developing countries, it’s the norm. Others can be even worse: in Philippines, if a person built a dwelling in a settlement, to purchase it legally he would have to form an association with his neighbors in order to qualify for a state housing finance program. The entire process takes 168 steps in 53 public and private agencies and 13 to 25 years. If you add the costs (oftentimes many times the yearly minimum salary) associated with these proceedings, it suddenly becomes very easy to see why people “choose” to stay in the extralegal sector – they don’t really have a choice. And you thought Western bureaucracy was bad!

That is not to say that there is no structure or order of any kind or costs associated by being in the extralegal sector – quite the contrary. Social contracts rule and other, less desirable, forms of authority spring up. But to get the people to move on to the legal side of things, the existing social contracts need to be respected and the transfer to the legal system needs to be worth it for the individuals. Though already known to the Romans, we nowadays often seem to forget that the Western law wasn’t just invented out of nowhere either, but was rather “discovered” from the existing practices. I have a feeling there’s a lesson here not only to the developing countries but to the Western nations also, who seem to have at times forgotten how laws should be formed. Quoting a quote from Harold Berman:

The systematization of law within various communities … was possible only because there had previously developed an informal structure of legal relations in those communities .. The Western legal tradition grew – in the past – out of the structure of social and economic interrelationships within and among groups on the ground. Behavioral patterns of interrelationship acquired normative dimensions: usages were transformed into custom … and custom into law.

It’d take far too much space to point out even 10% of all the fascinating insights offered in the book. All in all, The Mystery of Capital is a very enlightening book about the importance and true nature of capital and especially property rights – and what it takes to implement them the right way. By providing a clear description of why exactly capitalism works in “Western” countries and what it takes to work, it’s great reading for anyone interested in capitalism, property or laws – also if you want to understand what property really is, I can highly recommend The Mystery of Capital. However, rather than just you and me, it’s even more important for all the politicians either directly or indirectly trying to help developing countries to get their own economies running to read this book.

De Soto’s writing is very fluent and the depth of his experience and knowledge clearly shows. I don’t have any major complaints about the book, but if I’d have to nitpick, I’d say it’s 50 pages too long – I got the distinct feeling that the key points could well have been convincingly argued in a 25% shorter book also – as it is now, there’s a small feeling of repetition, but on the other hand there’s something to be said for De Soto arguing his case from so many angles and with ample historical background; it makes it that much more difficult to disprove his findings.

Finally, it’s important to note that this is not a book about unquestionably extolling the virtues of capitalism; as De Soto himself points out:

I am not a diehard capitalist. I do not view capitalism as a credo. Much more important to me are freedom, compassion for the poor, respect for the social contract and equal opportunity. But for the moment, to achieve those goals, capitalism is the only game in town. It is the only system we know that provides us with the tools required to create massive surplus value.