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  • Archive for January, 2004

    Good for them

    Posted by In-Cog-Nito on 30th January 2004 (All posts by )

    Talk about rising from the dead. Nortel (NT) smoked estimates and reported its first full year profit since 1997 and the stock is on fire. I didn’t think they would make it, but lo and behold they did.

    I do not hold any positions in NT stock.

    Posted in Economics & Finance | 4 Comments »

    Offshoring jobs part 2

    Posted by In-Cog-Nito on 29th January 2004 (All posts by )

    Lex sent me an excellent article yesterday about the effects of offshoring U.S. IT jobs.

    It’s very readable and compelling. I like the analogy the author uses with movies and the portrayal of computers at the work place:

    “The growing dtente was reflected in 40 years of Hollywood films. Desk Set, from 1957, was about a research department head who keeps her job only after a battle of wits with a computer (the machine blows up). By 1988, the computer had moved from threat to weapon: In Working Girl, Melanie Griffith has both a stock market terminal and a PC on her desk and uses her skills and knowledge to move from secretary to private office. By the time Mike Judge made Office Space in 1999, the PC had faded into just another bit of cubicle furniture.”

    I found another good article that makes a similar argument albeit slower to read and more numbers oriented.

    I like the analogy this article makes comparing the rise of IT India to the proliferation of the desktop computer. There’s no catchy line, so I’ll try to spell it out. When computers first started, the money was in making stuff like DRAM and chips. But chips were expensive to make, so computers were expensive to buy. With the offshoring of chip production, computers became a cheap commodity, and we have mass proliferation of the desktop PC. With a PC on every office desk, productivity soared.

    Like PC’s, the money now is in writing code and trying to make sense of all that computing power. By extension, the final product is prohibitively expensive, such as an integrated SAP or Oracle system. It’s expensive, so only the richest companies can use it to boost productivity. So if you can offshore and decrease the cost of technology by magnitudes, you make technology more accessible to more people. And as this previously expensive technology proliferates, you get another jump in productivity.

    Creative destruction has been the rule for centuries, and it’s still the rule now. I probably should have picked up on it earlier, but it’s the most compelling argument I’ve heard for offshoring service jobs to India. I’m liking this offshore idea more and more now.

    Posted in Uncategorized | 34 Comments »

    “Greedy Prosecutors” Update

    Posted by Jonathan on 28th January 2004 (All posts by )

    I have updated my earlier post to reflect recent developments in the Limbaugh case.

    Posted in Crime and Punishment | Comments Off on “Greedy Prosecutors” Update


    Posted by Jonathan on 28th January 2004 (All posts by )

    a road less traveled except maybe by people who drive really fast when no one else is around

    Posted in Photos | 13 Comments »

    Reminiscing ’bout the days of old

    Posted by In-Cog-Nito on 28th January 2004 (All posts by )

    So one of my clients is a venture capital fund in Silly Valley (my name for Silicon Valley). And being that I use to be in the high tech investing game, it’s a nice trip down memory lane.

    Remember back in the day when they said it was a good idea to buy a basket of stocks in a hot sector, and needing only one of them to become the next Microsoft for the whole investment to pay off? Well, boy did these guys ever – they’re the real deal. The fund began with $100 million, and one of their first investments was an early round investment in ABC Networks for $5 million. Five years later, at the height of the tech bull market, they distributed shares in ABC Networks to their partners (cashing out in VC speak) with a gain of over $625 million.

    Think about it for a minute. It’s the same as buying shares at $1 and selling it at $126 for a gain of $125. That’s a 125x return on the original investment. In percentage terms that’s a 12,500% return over 5 years, or roughly a compounded return of 265% per year over 5 years for their investment in ABC Networks. Overall, the original $100 million fund made over $850 million in capital gains for its investors. Or to put it simply, they turned $100 million into almost $1 billion. Takes your breath away doesn’t it?

    Capitalism at its finest.

    Note: Names and figures have been changed due to the information being privy to the fund and its investors. The figures used are fictional. However, I’ve maintained the magnitude of the figures for illustration purposes.

    As a side note, there’s plenty one could critique – i.e. the market was a euphoric bubble, the investors may not have sold once they received the shares and rode it down, we’ll never see a market like that again, etc, etc. I wanted to give an inside peak at a VC, what can go right, and a reason why people invest in venture capital funds. Hope you enjoy.

    Update: I forgot to mention, the standard fees the GP would charge to manage a fund is in the ballpark of 2.5% of capital committed per year and 20% of profits.

    Update2: Here’s a good article about Google and its relation to the IPO/VC world.

    Posted in Economics & Finance | 14 Comments »

    New Jim Bennett Article About the Anglosphere

    Posted by Chicago Boyz Archive on 26th January 2004 (All posts by )

    Jim Bennett has a new article in the current issue of The National Interest entitled “Networking Nation States”. This is a very solid piece of work, which will give us all something to mull while we wait for the book. Bennett is going to have his Anglosphere Institute up and running soon, and I will provide details about that as I get them.

    Posted in Anglosphere | 1 Comment »

    Just The Usual Slander

    Posted by Jonathan on 26th January 2004 (All posts by )

    Chicago boy Scott Burgess alerts us to some remarkably dishonest anti-American commentary in a Brit tabloid. The columnist asserts falsely that the U.S. forbids Red Cross visits to Guantanamo prisoners. (Lest we miss the point, the headline reads: “Even the Nazis let the Red Cross visit POWs. Why won’t Mr Bush?”)

    Scott’s blog is reliably a good read.

    Posted in Politics | 4 Comments »

    “Corporate Social Responsibility”

    Posted by Jonathan on 26th January 2004 (All posts by )

    Rob the BusinessPundit has a post on corporate philanthropy that echoes my own sentiments:

    I tend to err on the side of business and say that a business is only responsible for major, direct, negative effects of its policies (like pollution). My problem with making companies too concerned with social activities is that the causes they champion aren’t necessarily the causes I, as a shareholder, would prefer they champion. Why should they get to make the decisions about which charities get funding? Shouldn’t they give that money to shareholders and let them decide what to do with it? Ultimately, I wish these people that hate corporate profits so much would form their own non-profit companies. Let them figure out how to produce pharmaceuticals and computers and cars and everything else without using profitability as a guide. If they succeed, then great we will all be better off. But my guess is that they will fail. When companies follow profit, they follow what consumers want. Profit comes from satisfying consumer needs. That is social responsibility. There is a demand for solutions to societal problems. Over time that demand is being met. That is why a poor person today eats better than a king did several generations ago.

    It’s worth reading in full.

    UPDATE: Lex and I have a long exchange of views in the comments.

    Posted in Business, Society | 8 Comments »

    Want some fries with that?

    Posted by In-Cog-Nito on 25th January 2004 (All posts by )

    Good link via Drudge about a director who documented what happens when he ate nothing but McDonalds for 30 days.

    Posted in Uncategorized | 9 Comments »


    Posted by Jonathan on 23rd January 2004 (All posts by )

    Posted in Photos | 9 Comments »

    Greedy Prosecutors

    Posted by Jonathan on 23rd January 2004 (All posts by )

    A typical middle-aged guy with no criminal record, who started taking prescription meds for back pain, became addicted, and got caught, would be treated leniently if he agreed to seek treatment for his addiction. But if you’re famous, perhaps a famous Republican in a pivotal Democratic jurisdiction, they try to nail you.

    Limbaugh can afford good legal representation and will probably come out OK. But what does this episode say about the local prosecutors? Maybe there’s so little crime in Palm Beach that they have nothing better to do than pursue this marginal case.

    Or maybe the prosecutors’ proposed plea deal was so harsh because it was designed to be rejected (as Limbaugh’s attorney did). The obvious implication is that the prosecutors are either 1) Democratic hacks out for revenge for the 2000 election (or simply against a prominent Republican), 2) trying to prolong resolution of this otherwise minor case in order to advance their own careers, 3) trying to force Limbaugh to go to trial, which would be extremely costly in foregone income to him, even if he were not convicted, or 4) all of the above.

    UPDATE: The Florida Attorney General isn’t playing along with the prosecutors, and the prosecutors are backpedaling:

    Limbaugh’s attorney, Roy Black, questioned [Palm Beach County State Attorney] Krischer’s motives and said the release was part of a smear campaign. Prosecutors said they believed they were doing the right thing after consulting the law, the attorney general and the Florida Bar. But there was nothing in writing to support or refute their claim that they were following legal advice from the attorney general.

    That changed Wednesday with the release of a letter to Palm Beach County prosecutors from Patricia Gleason, general counsel for the attorney general. The letter lent credence to Limbaugh’s claim that the release of the records was improper.

    ”In this case,” Gleason wrote, “… it seems to me that the purpose in contacting me about this issue may not have been to obtain impartial advice on an open government issue, but rather to use a part of our conversation to justify your office’s decision that the documents should be released. This is disappointing to me personally and professionally.”

    Prosecutors dispatched a written reply to Gleason Wednesday stating that they were confident in their decision and consulted her only ”to see if there was anything we may have missed” while researching the issue.

    That last quoted paragraph is a doozy. So the prosecutors already knew the answer with confidence but asked the AG anyway? Yeah, right. I’m sure that if the attorney general, a conservative Republican, had agreed with them they would have used his opinion as cover for their treatment of Limbaugh. That would have helped them, and hurt him with Florida Republicans. But he was smart enough not to let the prosecutors use him, so now they are claiming he’s irrelevant. What a bunch of jackasses. It’s too bad they can’t be impeached. (Or can they — does anybody know?)

    Posted in Crime and Punishment, Politics | 19 Comments »

    The Mongols Return to Iraq

    Posted by Chicago Boyz Archive on 22nd January 2004 (All posts by )

    Mongolian troops

    It’s been a while. in 1258, the Mongols sacked Baghdad. Now, they are back under different auspices. (Link via Center For Security Policy.) You might be scratching your head over this. Why do we want 173 men who cannot be understood by anybody and whose equipment is decrepit, and who need to be flown, housed, fed and otherwise cared for by Uncle Sam? The same might be asked about many on the list President Bush ran through in his SOTU speech: “Britain, Australia, Japan, South Korea, the Philippines, Thailand, Italy, Spain, Poland, Denmark, Hungary, Bulgaria, Ukraine, Romania, the Netherlands, Norway, El Salvador, and the 17 other countries.” Some of the countries are making a substantive contribution. Others want to participate because they have their own reasons for wanting to work with Uncle Sam. But what we get out of this, especially with the smaller and poorer countries, is building relationships, making friends in remote places.

    I recall this interesting question, and answer from an interview with Robert Kaplan:

    Q: You mention the friendships that have developed between U.S. military men and their foreign counterparts. These relationships appear to be extremely important to the Special Forces service. Can you talk about why these friendships mean so much? Also, why is it important for us to have a system for tracking these relationships outside of an anecdotal one?

    A: What happens now is, there will be a crisis somewhere and an officer will say, “Oh, I know that army. A guy in that army was my student at Fort Leavenworth or Fort Benning and we were really good friends for a few years and then we lost contact. I’m sure he’s in the middle of this crisis. I wonder what he’s up to? I wonder what his e-mail address is?” If we could systematically keep track of these relationships and contacts, people would be able to access them in a crisis. We’d have better intelligence quickly and we’d be able to fix a problem too. When friendships are maintained, they are used. For instance, the Ghanaian Army may have a problem-it’s got rebels in the north, it lacks equipment, or it can’t keep up an airfield because the runway is damaged or there’s not enough money to keep paving it. So then a colonel in Ghana, who is friends with a Marine lieutenant at Camp Pendleton in California, can just get in touch with his friend and say, “You know, this is going wrong and that’s going wrong. Perhaps you could help us, perhaps you could send a training mission.” And remember, some of these training missions can be one person. Or they can be ten or twenty. They can be planned nine months in advance, or they can happen on the spot. The more flexible this process is-the more seamless the relationships between American middle- and higher-level officers and officers in other countries-the better our relationships with these foreign militaries are going to be, and the better able we’re going to be to deal with problems as they emerge in a world where every country is potentially strategic. If there’s one thing we learn from the news, it’s that the places that seem the most obscure today are the stuff of tomorrow’s headlines.

    Those Mongolian troops may not look like much. But this Iraq gig is a prestige assignment, for them. These are their best and brightest. Down the road, these guys are going to be the senior honchos in the Mongolian Army. And they will be in our rolodex. Just in case.

    Posted in Uncategorized | 47 Comments »

    Pleasure reading

    Posted by In-Cog-Nito on 22nd January 2004 (All posts by )

    I read a good article recently about Walmart and their part in the shift to offshoring US jobs.

    The article is skewed since the author seems to take the side of companies that went bust because of Walmart. And current Walmart vendors don’t want to talk about it understandably. The article has some good insights nonetheless.

    There was another good one about Wipro and offshoring white collar jobs.

    One underlying concern I have with wholesale shift of manufacturing offshore is that R&D usually follows manufacturing. You start with manufacturing, move to refining designs, and ultimately to complete R&D. Look at Japan and VCR’s. The national security implications have been debated endlessly so I won’t go into it unless someone wants to.

    Net net, there’s really no easy answer to the question since price is such a key determinant in the equation.

    Posted in Uncategorized | 11 Comments »


    Posted by In-Cog-Nito on 22nd January 2004 (All posts by )

    Don pointed to a good article about Sarbanes-Oxley.

    Like the Securities Act of 1933, I call Sarbox the “Accountants full employment act.”

    Being intimately familiar with the Big 4 (or Final 4 as I like to call it) since I work for one, I can shed some light on the smoke and mirrors. Audit is extremely short handed right now, meaning it’s a boon for anyone looking for a job in accounting. During the boom, the hot professiobal sectors out of college were consulting and i-banking. The result is a lack of students wanting to study accounting. With the new CPA guidelines upping the education requirements, it’s also harder to qualify to be an accountant. So the pipeline for the meat grinder is getting pretty lean. It should change due to supply and demand (money), but on the immediate horizon, implementation of Sarbox is akin to the Final 4 hitting the lottery. Revenge of the nerds if you will…

    If you have 24 accounting class units, need a job, and are not a complete tool, you should call your local Final 4 recruiter… Well, even if you are a complete tool, they’ll probably still take you…

    Posted in Uncategorized | Comments Off on Sarbox

    “Cheap Foreign Labor” and Prison Reform

    Posted by Jonathan on 22nd January 2004 (All posts by )

    Over at The Corner, Mark Krikorian suggested spending funds Bush earmarked for job training on “immigration enforcement” at work sites. The idea is to make cheap immigrant labor less available, and thereby to make domestic ex-convicts more attractive to employers.

    But how about streamlining immigration procedures instead? If immigrants will work for lower wages than ex-convicts, artificially restricting the labor market to benefit ex-cons amounts to an indirect and inefficient subsidy. Krikorian ignores the costs to business, and hence consumers, of immigration restrictions that drive up labor costs.

    He also ignores the possibility that employers prefer immigrants for many jobs at a given wage level. In that case the better course of action might be to eliminate, or at least lower, minimum wage rates that price less-productive and higher-risk workers out of jobs.

    It’s obvious that most immigrants come to this country because they want to work, but we shouldn’t forget that American employers want to hire them. It should be easier for hard-working immigrants to come here without first spending years jumping through bureaucratic hoops.

    Prison reform is a separate issue. Ex-convicts may be made employable via training programs (as Bush proposes), by lowering the minimum wage, or even by directly subsidizing employers who hire them. Attempting to increase demand for ex-con labor by driving illegal immigrants — many of whom are illegal mainly because it’s prohibitively difficult and time consuming to become legal — out of the labor market, is a poor alternative.

    Posted in Economics & Finance | 5 Comments »

    New Blog Crawler

    Posted by Jonathan on 21st January 2004 (All posts by )

    Gabe Rivera has a new blog-quoting robot that looks interesting. I’m not sure whether it’s actually updating yet, but it’s a good start. Headline placement is determined by blog linkage ratings.

    This kind of news aggregator can be useful if well done (I think this means: specialized, thoughtfully opinionated, and not a Google-style attempt to copy mainstream-journo “headline news” style). Gabe’s site seems to be Anglospheric in orientation. I wish him well.

    Posted in Blogging | Comments Off on New Blog Crawler

    How I’d Go To Mars

    Posted by Jay Manifold on 21st January 2004 (All posts by )

    Over on Arcturus, I rashly promised to post something about how I’d do the whole Moon-Mars thing. And so I shall, but with no pretense of technological or future-historical accuracy, though I’ll mention some technologies and dates; instead, I’ll be building a strawman proposal, with attention to its project-management aspects (in what follows, all definitions are taken from A Guide to the Project Management Body of Knowledge [PMBOK Guide], 2000 Edition; Project Management Institute).
    The first of those being assumptions, whose formal definition is “factors that, for planning purposes, are considered to be true, real, or certain.” In particular, I’ll assume that stakeholder (“individuals and organizations that are actively involved in the project, or whose interests may be positively or negatively affected as a result of project execution or project completion; they may also exert influence over the project and its results”) interests have already been balanced.
    They haven’t, of course, and the game-theoretic aspects of a program slated to stretch through as many as seven future Administrations, twice that number of Congresses, and nearly thirty Federal budgets, render the prospects for the new space policy rather bleak, I’m afraid. So let’s pretend that isn’t true. The American public is united in its support (or perhaps cowed into submission, or merely indifferent enough to raise no objection): we’re going to Mars! How do we get there?
    Read the rest of this entry »

    Posted in Space | 33 Comments »

    Spam, Spam, Spam, Spam. . .

    Posted by Jonathan on 20th January 2004 (All posts by )

    Spam, wonderful spam!

    Posted in Photos | 7 Comments »


    Posted by Chicago Boyz Archive on 19th January 2004 (All posts by )

    This site,, has a mind-boggling amount amount of information about the land armies of the British Empire and Commonwealth, and much ancillary information. I have been picking around on it, becoming increasingly impressed by it, and decided to share it with y’all.

    UPDATE: This site, Britain’s Small Wars is an excellent source on these little-known actions. I suspect there is much to learn from the way the British handled these difficult situations.

    Posted in Military Affairs | 11 Comments »

    A Wise Voice From Italy

    Posted by Chicago Boyz Archive on 19th January 2004 (All posts by )

    I look at the website of In theNational Interest from time to time. There is usually something good on there, and I commend it to your attention.

    I recently noticed this interesting review of a book called The Inevitable Alliance: Europe and the United States Beyond Iraq, by Vittorio Parsi. Since it is in Italian, Im not likely to ever read it. Parsi is yet another person who notes that the international system based upon state sovereignty which originated in the treaty of Westphalia is disintegrating. This is often taken to be a good thing by liberals, who hope to see an over-arching, supra-national world order emerge. However, the reviewer summarizes Parsis view as focusing not on some new superstate emerging. Rather, the emergence of failed and other rogue states as well as the menace of non-state terrorismthe latter being essentially a return to the privatized violence that marred pre-modern times. Parsi notes that it is the supposedly unsophisticated United States, not Europe, which has avant-garde grasp of the new world disorder.
    Read the rest of this entry »

    Posted in International Affairs | 1 Comment »

    Dean got smoked

    Posted by In-Cog-Nito on 19th January 2004 (All posts by )

    Wow, Howard Dean really got his head handed to him on a platter in Iowa

    “With 87 percent of the precincts reporting, Kerry had 37.9 percent, Edwards 32.1 percent, Dean 18 percent and Gephardt 10.6 percent.”

    Update: Man, this guy is losing it. Pretty funny!

    Update2: The hits just keep on coming… “Dean breaks out into spontaneous Star Spangled Banner after being heckled…”

    Talk about the epitome of pandering. He needed the conservative vote, so he wanted “the guys with the Confederate Flags”… he needed the Christian vote, so he found Jesus all of a sudden… About as low as it gets eh?

    Posted in Politics | 7 Comments »

    American Manufacturing

    Posted by In-Cog-Nito on 19th January 2004 (All posts by )

    My last client was for a spin out of a small manufacturing business of an oil equipment giant. This subsidiarys business isnt really related to the parents, so theyre trying to create value through an IPO. I was there for the diligence part of due diligence, so really got to know the operations inside out. (The cynic in me says the partners are there for the due part, which is to collect the bills due, but thats another story in itself.)

    One thing that really stuck out in my mind through this assignment was that this was one of the last great American manufacturing jobs left. By which I mean a relatively uneducated employee could start on the companys manufacturing line with a salary of around $22,000 a year, and work their way up. With hard work and patience, they could eventually work their way into a skilled job up the line with a respectable annual salary of $50,000 $70,000 a year. Granted it would take many years, but its an accessible on-ramp into middle class for literally someone with a high school education. If the person were really dynamic and had the brains, they could even swing themselves into a management position at some point. The company had good benefits, including retirement and all the usual goodies. In a nutshell, a workers paradise for lack of a better term.

    Looking over what they do and what they make, there isnt really anything – save social responsibility on the companys part – to stop them if they wanted to transplant their entire operations to China or India. They would save a bundle on labor costs, and given the highly automated nature of their machines, you really dont need that much skill on the part of the workers. At the very least, none of the skills involved are above the aptitude of an eager Chinese or Indian. The double edge sword of modernization is also that since you want to make everything automated and dumb it down to the n-th degree to maintain high quality, you get to a point where you can literally take the brain out of the equation. So pay a Chinese or Indian $100 a month, and you decrease your biggest operating expense by more than 90%.

    Posted in Economics & Finance | 7 Comments »


    Posted by In-Cog-Nito on 19th January 2004 (All posts by )


    I’m the new guy here at ChicagoBoyz. A big thank you to Jonathan for getting me into blogging. I’ll try to keep it interesting.

    For those who read my future posts, you can probably figure out who I am. But for work purposes, I have to keep it In-Cog-Nito, hence the pen name.

    With that, I look forward to adding my $0.02 to the pot.

    Posted in Announcements | 6 Comments »

    Fabulous Old Chicago Photos

    Posted by Jonathan on 19th January 2004 (All posts by )

    Combustible Boy links to this remarkable gallery of high-quality color photographs dating from the early 1940s to the 1960s.

    Well worth looking at.

    UPDATE: The entire photo collection, including a lot of background information, is here. (I will permalink this page.)

    Posted in Chicagoania | 6 Comments »

    Good Point

    Posted by Jonathan on 19th January 2004 (All posts by )

    The Man of High Quality Punditry points out Bill Clinton’s obvious conflict of interest in advising Demo presidential candidates.

    Didn’t anyone teach them not to seek medical advice from funeral directors?

    Posted in Politics | 3 Comments »