1. The UK is thinking of letting a company with links to China's government censor their internet exposure. This is another example of the basic rule of thumb that when people are told to think of the children the policies proposed are going to be pretty asinine.
In the UK it is legal to bet on many things. And with the royals expecting a baby, many people were betting. This isn't a market I would want to be a part of - it seems almost obvious that some people will know the actual information and betting against people who hold the winning hand isn't usually a profitable activity. From the WSJ, we learn the odds were heavily in favor of the baby being a girl, despite 1.07 boys being born to every girl.
Bookmakers are offering bettors a chance to predict the child's gender. And a girl is the overwhelming favorite, with payouts of just £4 on a £7 bet this past week. A spokesman for the couple announced last month that the duke and duchess don't know the gender.
The betting markets turned out to be quite wrong - it was a boy. So what happened? For one thing, it seems like there wasn't a sizeable information leakage (Or maybe there was, but people didn't believe Harry enough to bet on his information). If someone made money betting on the sex of the baby, they made it without impacting the wider market. So the betting market was wrong for one of two reasons - psychic hedging and/or misinformation.
Psychic hedging is betting on an outcome that will make the person unhappy. So if a sports fan bets against their favorite team, either their favorite team will have won or they'll have money. In either situation they'll be happy. In this case, there is presumably a preference for a new king. Not only are male leaders more generally preferred, the birth of a girl would involve a messy procedure of changing the law to allow the girl to retain her place in line. This preference for a psychic hedge would be combined with misinformation and misinterpreted market signals - betting on the expensive side of this type of trade is the easiest way to presumably follow other traders who might have inside information - to skew the odds even more in favor of a girl than could be explained by psychic hedging alone.
If insiders did make money off of these betting markets they got away with it quite handily this time.
A lot of people seem to think that most CEOs are actively evil and that this explanation can be used to explain many of the problems in our economy. A recent example of this fallacy comes from a ritholtz.com post looking into the way appraisers that didn't inflate the value of houses were seemingly systematically blacklisted.
"The appraisers’ petition was done over the course of seven years. Even if we assumed, contrary to fact, that the CEO did not originate the plan to inflate the appraisals the CEOs knew that they were making enormous numbers of fraudulent “liar’s” loans with fraudulent appraisals. It is easy for a CEO to stop pervasive fraudulent lending and appraisals. Where appraisal fraud was common it was done with the CEO’s support."
1. This looks like an effective way to do cardio.
My friend Ben posed an interesting question - what will be the Pet's.com investments of this era? He made the point that it isn't obvious to everyone at the time that these companies are ignoring economic realities - many people were convinced to invest in the company and many others decided to work for it before it was exposed as hopeless.
- Today's era "bubble" investing is occurring largely away from the public markets. For better or worse, normal investors aren't getting involved in tech start ups until much later in the game. This means there are less high profile cases where individuals lose money, which is why people were so surprised by Facebook's public market performance.
- VCs are relatively secretive about their return on individual investments, especially failed investments. Many failed companies turn in acqui-hires for undisclosed amounts. When these companies shut down or change directions without an exit their profiles are either scrubbed of investors or are never completed in the first place to avoid damaging the reputation of their investors (Which is silly since all VCs invest in companies that do badly). This means there are less high profile failures.
- The old economy still has lots of inefficiencies, so there is still lots of room for smart programmers to team up up with people who know industries to fix inefficiencies. This trend can be summarize by anything from smart enterprise where new start ups are going to replace old inefficient software to software eating the world. Either way, it means that there will be many more success stories for every failure. And with all of the successful companies it seems silly to focus on the failures. No one is making fun of Bebo these days, unless it is to point out the elitism and hypocrisy of the founders' new clubhouse.
1. Robin Hanson examines why betting isn't more common. All of these issues he brings up seem relevant, but the introduction of money into the equation seeming rude and highlighting power differences outside the conversation is probably the most important. Maybe that's why my friends won't make many bets with me... or maybe that's why I don't have more friends.
Standard and Poor's is going for an interesting defense.
S&P said in its request to dismiss the case that the government can’t base its fraud claims on S&P’s assertions that its ratings were independent, objective and free of conflicts of interest because U.S. courts have found that such vague and generalized statements are the kind of “puffery” that a reasonable investor wouldn’t rely on.
And yet rating agencies are still a key part of financial regulations.
A lot of people have been talking about moving from California to Texas due to an increasingly unfavorable policy regime in California. But they are forgetting about one of the very unfavorable regulatory regimes in Texas - their friendliness to IP lawsuits.
Patent lawsuits are rife in East Texas. At first it was just one or two particularly friendly judges, but over time the perception has been that juries are even more favorable to plaintiffs - perhaps because they realize that their local economy is supported by the large amount of patent lawsuits filed in their district.
Companies should make every effort to avoid doing business in places where the litigation environment is unfavorable. It might be hard to avoid patent lawsuits by avoiding doing business in the state, because apparently all it takes is for companies to register in the state and courts may justify the location based on that alone. The American Invents Act might have helped solve this problem already by splitting up joinder lawsuits where one patent troll sues everyone at once so the defenders can have more of a say in the location of the trial.
So boycotting Texas probably wouldn't do much to stop patent trolls. But it would have been funny if it could have potentially helped.
1. Why Youtube isn't the best long term partner for content creators.
1. The Supreme Court ruling on patenting genes will need to address these issues again.