Banker Bonus Tax: UK and France are Doing it. Why not the US?

The UK has imposed a 50% tax on all banker bonuses greater than $40,000. This will be in effect for all bankks – not just the ones that were bailed out. France is in the process of approving similar legislation. In the UK, the  system will work as follows:

Banks will be charged a 50 percent tax on 2009 bonuses of more than £25,000, or $40,800. It will be imposed on the pool of bonuses paid by a bank, rather than individual payments, and it will be paid by the bank — not by the recipient of the bonus. It will take effect immediately and will affect banks’ 2009 profits.

The reasoning is straightforward: the financial firms were responsible for the financial crisis, the loss of millions of jobs, poverty, hunger, homelessness. All firms are to blame – not just the ones lucky and/or connected and/or large enough to get bailed out. So by taxing all firms, it avoids the problem of having bankers scrambling away from the duds and back into the profitable firms. An equal tax makes ‘em squirm, but prevents scrambling.

France is in the process of enacting similar legislation.

In the U.S., however, where the average bonus at Goldman Sachs is $700,000 PER EMPLOYEE, yet public outcry has been muted. Even as Obama calls Wall Street to task, he hasn’t done anything about it. Is that likely to change? Probably not in the near future. The public appears to be beaten down enough to accept extreme inequality as the norm and continue to go about their lives as best they can.

Bush is to Ritz-Carlton As Obama is to….

I ran across the following when reviewing government contracts…

Under the Bush Administration, the Department of Homeland Security spent $13,094 for a conference room in the Ritz Carlton on July 8, 2008.The meeting was for the National Infrastructure Advisory Council (NIAC).

Attending the meeting: Mr. Erle A. Nye; Mr. Alfred R. Berkeley  III; Mr. Edmund G. Archuleta; Dr. Craig R. Barrett; Mr. David J. Bronczek; Mr. Wesley Bush; Ms. Margaret E. Grayson; Mr. Phillip Heasley; Mr. David Kepler; Mr. Thomas E. Noonan; Hon. Tim Pawlenty; Mr. Gregory Peters; Mr. James A. Reid; Dr. Linwood H. Rose; Mr. Matthew Rose; Mr. Michael Wallace; Mr. John Williams; and Ms. Martha Wyrsch.

In addition to approving the minutes of the previous meeting, the members offered insight to the Department of Homeland Security on the need to secure America’s privately owned infrastructure.

Full minutes available here: http://www.dhs.gov/xlibrary/assets/niac/niac_meeting_minutes_2008-07-08.pdf

Under the Obama Administration, NIAC meetings have been held at the Marriott.

Coincidence, or what? Twittering at the alter, etc.

Reuters article on a wedding where the groom paused at the alter to update his twitter AND facebook status. It was bound to happen, sooner or later. Nothing too surprising, move along, move along.

Meanwhile, a few coincidences in the article make reading rather dense. Here are a few details to sort out the confusion:

• The groom works at a pet store.
• The groom’s job title at the pet store (according to LinkedIn) is “architect”
• The groom is not an architect – even when not getting married, he remains, professionally, a groom.
• The groom’s name is Dana Hanna. He is a male.
• Mentions of “Dana” refer to the groom – Dana Hanna
• Mentions of “Hanna” refer to the groom as well – Dana Hanna

The bride, @TracyPage, is also busy on twitter, describing anxiety over so much publicity. Forget the publicity – just try to clear up the confusion!

“Cash for Clunkers” or “Rebate for the Rich”

The government program to reimburse $3,500-$4,500 for junking a fuel-inefficient car when purchasing a new, fuel-effecient car sounds good in theory. But the program is simply subsidizing the replacement of luxury cars with newer luxury cars. Once the results are in, expect to see more newer cars have been junked than actual clunkers!

2008 Mercedes S500 (Sticker price: $113,394)

Qualifies for $3,500 Government Rebate

Fuel Type	Premium
Engine Size	5.5 L
Cylinders	12
Transmission	Automatic 5-spd
Drive	Rear-Wheel Drive
Options	TurboCharger, EMS 2MODE CLKUP
Vehicle Category	Passenger Car
Combined MPG	13
Qualifies for CARS?	Yes. You may qualify for the CARS program.

1990 Dodge Colt Vista Wagon

Does Not Qualify for $3,500 rebate

Fuel Type	Regular
Engine Size	2L
Cylinders	4
Transmission	Automatic 3-spd
Drive	Front-Wheel Drive
Options	(FFS)
Vehicle Category	Passenger Car
Combined MPG	20
Qualifies for CARS?	No. Your trade-in must have a Combined MPG rating of 18 MPG or less to qualify.

Obviously no one would trade in a 2008 Mercedes for $3,500 – but a good majority of the “clunkers” are going to be older luxury cars, rather than the cheap cars that burn up a liter of oil with each tank of gas.

7 Out of 10 Indian Call Centers Fail Turing Test

Human or Machine? In 1950 Alan Turing proposed the Turing Test as a way to answer the question, “Can machines think?” A computer passes the test when a person can pose questions to it and no longer that the responses are not human.

So far, no computer has yet to pass the Turing test. However, a new breed of human is capable of FAILING the Turing test: offshore call center operators. Although there are humans taking the calls, the responses they give to many questions have become increasingly formulaic. Questions posed may be misinterpreted, as the reps pick up on a key word but misunderstand the nuances of the query. Often, they repreat the same phrases over and over, giving a “broken record” sound.

7 out of 10 Indian Call Centers fail the Turing Test for at least one of these reasons:

• Continuous repetition (“broken record” effect)
• Incessant Confirmation (e.g.,repeating each question verbatim, and appending “is that correct?”)
• No end in sight – combining strings of “have a good day,” “is there anything else I can help with?” and “thank you for calling” to create an infinite loop of polite chit-chat rather than terminating the call
• Lack of comprehension – the question might be heard and even answered, but was it ever truly understood?
• Lack of empathy – you can feel it when a rep is “answering tickets” rather than answering people

There is big money at stake. U.S. Call Centers represent a $23 billion industry. The Indian call center ndustry is equally staggering. What makes this worthwhile is that a call center rep may make $3-$9 per hour – and comapnies know that most customers value their time more highly and will  try to accomodate the “automatons” answering the phone in order to speed up the process.

Why the Department of Defense Failed to Secure Our Computers

Every day, new viruses emerge that compromise the security of millions of computers – both personal and corporate. As government agencies increasingly rely upon commercial software for Top Secret computer systems, they found themselves facing a difficult dilemma: continue using their 80’s era software or upgrade to the latest commercial systems, while exposing themselves to the security vulnerabilities that plague everyday users.

From 1999-2001, Robert Meushaw, the director of the NSA’s Information Assurance Reserach Laboratory (NIARL), and his team worked on a solution that coul dgive hte best of both worlds. The system he developed, codenamed NetTop, uses a “sandbox” technique whereby inherently insecure software (such as Microsoft Windows and MS Office) is granted access to a limited portion of the computer. Even if one of the insecure applications was infected with a virus, it is unable to spread beyond the specific machine.

Unfortunately, the results were disappointing. Two crucial missteps ultimately led to its slow adoption within government agencies and by the general public.

The first problem was that NetTop compromised security for functionality. By being neither 100% secure, nor 100% functional, security experts were unsatisfied, and users were frustrated.

The second problem was around cost. Each “virtual” system required its own licenses. Thus, Top Secret computers that accessed six separate networks would require 6 licenses for Microsoft Windows on a single computer! Furthermore, the virtualization component was developed by a for-profit startup named VMWare (now publicly traded NYSE: VMW). As VMWare grew larger and more successful, Microsoft started to tamp down the competition by restricting its licensing terms to make virtualization even less cost-effective.

The end result has been another expensive government project with limited application and a dim future.

Three Things Every Business Should Do in a Recession

Change begets opportunity. Given the current economic situation, here are three things that every company should do:

Renegotiate vendor contracts. This is not to say that you should squeeze all profit out of your vendors. Business relations should always be mutually beneficial. However, contracts that were negotiated a few years ago when things looked rosy should be carefully reevaluated. For example, one small business was able to renegotiate their contract with Verizon Business and cut their bill in half.

Foster employee loyalty. Employees are more likely to stay at their jobs now, if they feel the jobs are secure. The good news is it’s easier to retain employees. But don’t be lulled by this. Unhappy employees being forced to work harder and longer hours will not stick around once the economy turns. Now that employee’s expectations are lower, do small things to increase job satisfaction and make people feel appreciated.

Do more for your customers. Much advice centers on how to maintain price discipline and avoid doing work at (or below) cost. There’s a different opportunity, however. Given that your customers are likely facing a new environment, they may be open to help in new, adjacent areas. For example, a company that downsized may now be shortstaffed in certain areas and happy to have a vendor provide managed services. Look for these areas, and propose solutions for your customers’ problems.

Why Startup CEOs Are Fired

Noubar Afeyan, founder and CEO of Flagship Ventures, started his first company at age 24. As he was raising money, many investors told him that they wanted to bring on a more experienced CEO to run the company. But Afeyan wanted investors who would trust him, so he kept looking until he raised $1 million from three VC firms that would let him stay as CEO. Then on his second day after receiving funding, he did something unexpected: he hired an outside CEO to replace himself.

Now a prominent venture capitalist, Afeyan says a startup CEO stands for “Current Executive Officer.” It’s simply a matter of fact, he says, that 80% of startup CEOs are replaced at some point. And the cause is in large part due to the structure of venture capital firms.

Proposition #1: startups miss their numbers. It’s inevitable with any startup, good or bad, successful or failing.

Now, VC firms are run by individuals but have collective responsibility. Each partner has a portfolio of startups that they work with, but the other partners at the VC firm have an interest in the performance of all portfolio companies, if only a passing knowledge of what’s going on inside the companies.

The first time a startup misses its numbers, the lead partner usually goes to bat for the company. He or she tells the other VC partners, “yes they missed their numbers but they have a plan…”

The second time a startup misses its numbers and the VC partners are unhappy with the performance. They ask the lead investor what he’s doing about the situation, the most obvious answer is “there’s a leadership problem and we’re replacing the CEO.”

CEOs are critical to the success of a startup, but also the most interchangeable. Pull one out, drop a new one in, and the startup continues without missing a beat. So long as the CEO is not the founder. That’s why venture capitalists don’t like the founder to be CEO – because then if the founder/CEO is fired there is no more company.

Moral of the story? If you’re a founder of a startup looking for Venture Capital money, you probably don’t want to stay on as CEO. And if you’re a CEO of a VC-backed startup, keep your resume up to date (and try not to miss your numbers!)

Space Debris Problem Escalates

Today an inactive Russian satellite collided with an active, American satellite (owned by satellite phone service provider Iridium Satellite, LLC).

The collision, occuring over Siberia, has sent thousands of pounds of debris into high-speed orbit. The debris poses a danger to other satellites, which has a small possibility of creating a chain reaction of collisons. Such a situation would effectively cut off much of the world’s communications infrastructure.

Debris Moving Through Space

This is not the first collision to occur.

On 11 January 2007 China successfully demonstrated anti-satellite (ASAT) missile capability by destroying an aging Feng Yun 1C weather satellite. China’s action must be considered from three perspectives: the militarization of space, the “environmental” impact of debris clogging the stratosphere, and China’s posture in foreign affairs. From an “environmental” perspective, the destruction of the weather satellite  resulted in an unprecedented cloud of debris in polar orbit. NORAD is tracking 1,037 large pieces of debris, and NASA estimates 35,000 pieces larger than one centimeter have spread from 200 kilometers to 4,000 kilometers above the earth. This has posed risk of collision to Low Earth Orbiting (LEO) satellites and may hamper future satellite deployment.

The Center for Space Standards and Innovation estimates that two-thirds of satellites it tracks come relatively close to the fragments on a regular basis.

The U.S. Satellite telecommunications industry is a $3.5 billion business. A detailed industry report is available here.

Beginning of a New Era

Today I could feel the beginning of a new era. A time for hope, for better health and safety. For enjoying the simple things of life.

That’s right – this morning I changed my Brita filter.

The dangers of an old Brita filter have serious and far-reaching implications. Because Brita filters out Chlorine, bacteria flourish in old filters.

Small businesses are also at stake. Bottled water is a $2 billion industry.  The average firm has roughly $10 million in revenue and 23% net profit margins. Without our continued vigilance, the 7,414 employees working in this industry might have their jobs at stake.

Enjoy a fresh glass of water.  Cheers!