The end of the PPX.

As some of you may know, I've been an active trader on the PopSci Predictions Exchange (PPX) for the past two years. During that time, I've marched my way to the top 15 (#14 as of this writing) out of over 33,000 traders. As of last Friday (May 8, 2009) it was announced that the PPX will be closing effective June 1st. So, I wrote the following commentary to express my thoughts on why and how this came to be.

{Disclaimer: The following is pure speculation and is not a real reflection of PopSci or Bonnier, nor am I employed in any way monetarily compensated or tied in to those respective organizations.}

There's pretty much only one way to sum up all of this: economics. To dig down deeper we look at the history of PopSci, and to do that we turn back to January 25, 2007, the day that Bonnier Corporation bought PopSci, along with 17 other magazines from Time Warner. This was during a time when magazine subscriptions and sales were dropping, while online readership increased (and if you’ve been keeping up with the news lately, you know that this has only accelerated.)
Unfortunately, the ad and subscription revenue model changes when things start moving towards the online world. There are a few reasons for this. For one, a good bit of the content that can be found in the magazine can also be found online, for free (to the reader.) But, keep in mind that for every PopSci magazine sold, there are about 5 readers to that magazine. So, in other words, of all of the readers, only 1 in 5 is actually paying for it. And those that do are only paying around $1 per month. You can take that $1 and divide it up into readers and that means that each reader contributes about 20 cents a month on average. So the with the online world there really isn't much lost in the way of subscription revenue, it’s the ad revenue that counts.
You'll notice that in the back of each PopSci mag, there are lots of what I call "secondary" or "classified ads." These ads sell everything from you-know-what enhancement and remedies to an assortment of gadgets and the likes. If you notice, those ads aren't found here online. Then there are primary ads for cars and trucks, shavers, flashlights, laptops, you know, the stuff that you're more likely to buy, or would at least be interested in. Chances are that if it is advertised in the magazine, then at one time it may have had an entry into my favorite section, "What’s New." Otherwise, there's a good chance that those companies sell products that compete against those things that are new. There’s no doubt, that a lot of marketing on behalf of the PopSci /Bonnier staff that goes on to seek potential advertisers who may be interested in placing their ads near an article that may be related to their product.

Now, the price paid for that advertisement space is all driven by supply and demand. Supply is the amount of ad space within a magazine while demand is the amount of people who want to advertise in that space. Those advertisers look at a set of more complicated factors, like the number of readers who are likely to someday purchase a product that that company offers within a given time period. Essentially, it’s the advertiser's goal to drive brand recognition. They know that you may not buy that truck that you see in the magazine today, but, eventually you just might. Generally, the higher the price the product is, the more you have to sustain your sales pitch to your audience.

So, that brings us back to our problem: economics. With the economy the way it is, the demand for print ads is down. This has been driven by the fact that we, as consumers, just aren’t in much of a mood to buy things, and besides we’re too busy hanging out on MySpace of Facebook to really care. Well, that changes the advertiser’s focus. Suddenly, they’re not as interested in placing ads in print magazines; they’re more interested in capturing your attention online. So they tell the print publisher, “Well, I’m just not that interested in placing an ad this year.” The publisher replies with a lower price, and eventually the advertiser agrees to run the ad since the price is now more affordable. So with that, you can see the problem: you’re still printing the same amount of ads, but now you’re just getting less money for them.

That brings us back into the selling of PopSci to the Bonnie Corporation. One company, Time Warner, sees that it’s simply better to sell off its underperforming brands while Bonnier sees the opportunity to gain new market share and turn the revenue stream around for its newly purchased publisher. Suddenly, new creative ideas sprang up to solve this problem of decreased print ad revenue, and increase its online ad revenue. The solution seems simple, if you can create a way to get readers to return to your website and do so, repetitively, over the long run, you can increase the demand for ad space, especially from those companies that need to keep brand recognition high. Those advertisements work best when you have a returning audience. You can charge advertisers for a pay-per-view (1000s of views) in addition to a pay-per-click fee. So out of this realization and creative process, PopSci comes up with idea to do an online exchange, yes, the PPX.

The PPX seems like it is the magical bullet needed to solve the problem. Not only will the readers be engaged in an online activity that will keep them returning, but each visit may require several clicks and thus increases the chances of pay-per-click revenue. At the same time, our ad space becomes more attractive to those long term brand recognition driven advertisers, and that could lead to pay-per-view revenue. And, to top it all off, the PPX becomes a scientific tool itself, as it becomes a science experiment to determine the viability of predictions markets.
Out of the gate, the PPX was a bit flawed. For example, despite the claim, the price of a proposition doesn’t necessarily reflect the percentage of people who think a proposition will come true. The claim is that if the price is at POP$50, then 50% of the audience thinks it could happen, and 50% does not. But in reality we know that if one person buys 1000 shares, then the price goes up by POP$ 0.25. (Now, I know a parameter has been added so that a stock’s could only move after it achieved a high enough volume - apparently to one direction.) So, if only one person buys 1000 shares, then according to the price, 50.25% percent of the traders of that particular proposition think that that event will occur. In reality, 100% of the traders of that stock, so far, agree. (On the other hand if there were 10,000 traders, that would only represent 1/10,000th of the market.) Once the stock price starts to move, Most traders bought or sold in the direction of the movement, whether they agreed or not. Now, it was argued that over time, the price would better reflect the opinions of the traders, but we all know that there was a disconnect between trader’s opinions and prop price.

Another example of a flaw was the limitation to buy only 1000 shares. Though this was important given that the price went up or down based on 1000 shares of movement, this limited the ability for a proposition to reach its true price. If the pricing was based on a scale that was determined by the total number of outstanding shares of that stock rather than 1000 shares of movement, this concept would have worked better. (It’s important to keep in mind that for every new trader who owns a prop, either short or long, the amount of outstanding shares increases by the amount purchased. This is unlike the real stock market where there is a limited quantity of shares available, for every share bought, one must be sold. For arguments sake, ignore stock splits and issuance of new stock, etc.) In other words, as number of outstanding shares per a given prop increases, the smaller the price change interval would be. The price change interval would be determined by a function of the number of newly purchased shares as a percent of current outstanding shares. There would of course be a minimum and maximum price change interval, for example: at least $.01 no greater than $0.25. Another reason that the maximum shares were limited, was to encourage people to buy more shares of different props (portfolio diversification), but the principle to not put all of your eggs into one basket would have kept this in check. Finally, the 1000 share max rule could make sense to give more traders an equal chance to participate. This is a fair and valid reason, but I think that a limitation of buying more than a percentage (based on outstanding shares) of a given prop per a predetermined amount of time would have helped. Also the pricing model, as stated above, would have reduced the propensity for market domination by a select few elite traders.

Furthermore, the game was complex and perhaps too complicated to understand for too many of those who wanted to participate. This can easily be seen by simply counting the total number of players who never traded and those who never earned as much, or lost a significant portion of their original portfolio values. Finally, those flaws were matched by visual and web design mistakes. It seemed that every time a new feature was rolled out, it was met with more problems. For example: a menu wouldn’t work, a broken links, etc.

So those flaws that I’ve described reduced the number of would-be traders. (Satisfied traders encourage new traders to join.) This all drives me back to making my point: economics. As discussed, the ad revenue is the primary driver, and the goal should have been to sale ads based on both concepts: per view, and per click. Unfortunately, the way PPX is set up, it simply doesn’t cut it. With each user, you can only get so many ad clicks per ad per a given time frame. When you think about the mechanics how the PPX is set up, most of the ads are ignored as traders are focused on trading and not the ads. Once you’ve seen the ad, each new time you see it within a short time frame, isn’t going to drive you to click on it any more than the previous times. It’s the rule of diminishing returns. After awhile, similar ads just become a blur during the trade process.
To overcome this lack of clicking, the only way to create more revenue is to have more registered users, and those people need to be return users who visit frequently. Unfortunately, out of the 1.3 million subscribers or 6.7 million readers, there were only 33,000 registered PPX users. We can only guess that a small fraction of those actually returned to play frequently. That’s the problem that we have today. PPX was set up on a 2 year contract with Virtual Specialist, the operators of PPX. This of course likely had the option to renew. As far as we know, PopSci had full intentions to renew the contract over and over again, but only provided that it brought in enough of a revenue stream to compensate for the monthly licensing and site maintenance fees and then some. PopSci knew of its problem long ago. It knew that growth was limited and that there was a diminishing rate each passing month. It tried to solve the problem by correcting some of the problems cited by its users, and they were able to do this by hiring better staff members who understood these dynamics. They even spent the money to upgrade the look and feel of the site. Unfortunately, this didn’t go as smoothly, and it really wasn’t making much of an impact. So, an important business decision had to be made. Do we spend the money, fix the flaws, and find new ways to encourage new people to play, or do we cut our losses and retool our site with a different function for our readers while maintaining the function of creating an ad-based revenue source? I’m sure that in the end, it was a tough decision to make by those who were directly involved, and probably a much easier one to make for those who count the change and keep the budget.

Now, as a final note, you do have to question the decision to bring on a quiz model. If the picture of the school aged children that was used to promote the leagues, which never worked, is any indication to the direction of this website, it shows the desire to hit a larger different spectrum of the readers. You see, it appears as if a majority of those 6.7 million readers were school aged (9-15 years), and not 16-60 year olds who play PPX. The only question is, do they have the money to buy things, and if not do they have the ability to convince those who do have the money to buy things?

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Texas' Economic Condition - An Excerpt from the Beige Book

Since the economy is in a full downturn, I thought I would place the excerpt of the Beige Book report that covers the Dallas District (which reports economic conditions across the state of Texas.) To see the full report click here. (Otherwise, click on "read more" to read just the Dallas District exerpt.)


ELEVENTH DISTRICT—DALLAS
     Economic conditions in the Eleventh District continued to weaken from mid-November to year-end 2008. Contacts across a broad range of industries noted reduced demand and uncertainty about the outlook. Manufacturing, commercial construction, energy and transportation services generally reported the largest drop in demand while residential construction remains at low levels. Accounting and legal services seemed to hold up the best although they reported that demand was flat to slightly down. Bank lending declined due to tighter credit and weaker loan demand. Most respondents don’t expect conditions to improve until the second half of 2009 with a growing number of respondents now looking at early 2010. Prices. In general most service firms reported no change in prices while most goods producers reported declines. Many manufacturing respondents noted that while energy costs have come down, lower capacity utilization rates have put upward pressure on per unit production costs. Retailers reported large discounts were needed to move merchandise over the holiday season. Many contacts reported that fuel surcharges for transportation that were instituted earlier in 2008 were being dropped. Light sweet crude oil fell to $37 per barrel by year-end, the lowest price since 2004, from $55 per barrel in mid-November. Contacts said a huge over-supply of crude oil driven by the US and global slowdown led to the decline and that consecutive cuts by OPEC were not sufficient to stem the decline. Oil product prices fell as fast as crude oil, leaving refiner margins weak. On-highway prices for both gasoline and diesel fell by about 50 cents per gallon since the last survey and natural gas prices declined by about a $1 per Mcf from $6.50 per Mcf in mid-November.

Labor Market
     Labor markets remained weak as most contacts reported that they had maintained or reduced employment since the last survey. Labor markets were weakest in manufacturing where many firms extended temporary plant closings or reduced operating hours. Many manufacturing contacts reported that they had laid off temporary or hourly workers and that they are likely to reduce full-time staff at the start of the year. Layoffs were becoming widespread in the energy industry, and they are expected to grow in 2009. Many contacts reported hiring freezes and reported little if any wage increases. Manufacturing. Most manufacturing contacts reported declines in demand and reductions in capacity utilization. Most contacts said that they have managed to keep their inventories at desired lean levels but an increased number of contacts reported that inventories had risen to higher than desired levels. Construction-related manufacturers reported continued declines in shipments and orders even after adjusting for normal seasonal reductions. Most producers reported reductions in jobs and expect further cuts in early 2009. Some contacts noted that the recent plunge in commodity prices provided only slight relief in the cost of production since capital costs per unit of output have increased as capacity utilization has declined and because pricing on rail and truck transportation and coal have not fallen due to long-term contracts. Contacts continue to report that demand from commercial construction is shrinking rapidly with the main exception being government sponsored projects. Contacts reported that the outlook has gotten worse and most do not expect a turnaround until late 2009. Most respondents in high-tech manufacturing industries report that demand has fallen moderately since the last survey. Weakness was widespread across global markets and products. Most firms said that they were planning to reduce employment over the next several months. Respondents reported lean inventories, although one respondent said the recent reduction in demand from Asia had caught them off guard and that they were working aggressively to reduce inventories. While one respondent noted that their factories were running at only 40 to 45 percent of capacity, another respondent said that the current downturn is not nearly as bad as the high-tech recession in 2001. Most respondents expect some improvement in demand sometime in the second half of 2009. Paper manufacturers reported continued declines in production and orders. Demand for corrugated paper used for boxes and packing material has fallen sharply. Contacts noted that this is a reflection of the overall weakness in manufacturing as producers of a wide range of products are shipping less output. Noted exceptions to the weakness are food processors, where contacts suggest that their industry remains recession-proof. Respondents reported that while margins for gasoline were particularly weak, refinery capacity utilization held steady at about 85 percent. Respondents in petrochemicals and derivative plastics said that demand and prices have fallen sharply since the last survey. The decline in demand stemmed from declines in domestic housing, autos, and general manufacturing activity, as well as export markets. At least 10 large plants have shutdown on the Gulf Coast in recent weeks, and others have cut runs. Layoffs have been widespread among firms and their contractors.

Retail Sales
     Almost all retailers reported weak holiday sales. The weakness was broad-based and included discount stores. One contact noted that it was the worst holiday season for his company in 38 years. Weakness was broad-based across department store products but contacts noted particularly sharp declines in demand for jewelry and men’s clothing. A contact with stores throughout the District said that year-over-year sales declined the most in Dallas and the least in Houston. Department store contacts expect demand to be weak throughout most of 2009. Auto dealers report that sales and traffic continue to fall from already depressed levels. While domestic brands have been hit the hardest, contacts report that recent declines have been broad-based across all vehicle brands. Respondents report that manufacturer incentives are ample but that they are not having as much impact as in the past. One respondent said that in order to reduce his inventory, he likely will not order any new vehicles until February. A bright spot is used car sales and repair services which have increased slightly since the last survey. Most contacts expected very weak new vehicle sales at least though the first half of 2009. Contacts are hoping for some improvement in the second half of the year but are cautious since the outlook remains very uncertain. Services. Staffing firms report that demand remains sluggish. Most contacts report that there is little demand for permanent hires. Although their customers are keeping many short-term contract positions, they are not adding new positions. Contacts said that demand has been reduced by temporary plant closings, many of which have been extended due to weak demand conditions. Contacts report that some staffing firms are beginning to lower rates to remain competitive and retain market share. Accounting and legal firms report that activity was flat to slightly down since the last survey and that receivables are getting slower and harder to collect. Legal firms reported new real estate projects have dropped off sharply and that many projects are being put on hold for an indefinite period of time. International business has also declined. Offsetting this has been an increase in litigation and bankruptcy services. Airlines report that demand continues to weaken and that it is likely to continue to fall over the next six months. Respondents in container cargo and intermodal trade report a sharp drop off in activity since the last survey due to declines in international trade volumes. Intermodal transport services also noted a decline in demand. Shipping companies reported that the largest declines in volumes have been to retailers although consumer shipments have also weakened.

Construction and Real Estate
     Housing conditions in the District remain very weak, according to respondents. Home sales have fallen considerably since credit conditions tightened, and respondents report that traffic remains nearly nonexistent. Contacts reported that cancellations remain prevalent, in some cases outpacing sales. Median home prices have edged down but have avoided the double digit declines prevalent in other areas of the country. Respondents say that compared to other areas in which they do business, Texas continues to fare better despite the poor conditions. District respondents said apartment demand fell over the survey period. New construction added units at the same time move-outs increased, leading to increases in vacancy rates. Commercial real estate transactions--both leasing and investment--have ground to a halt. Contacts reported “nothing is going on”. Outlooks remain uncertain, although one contact noted scattered signs of optimism, with people talking of possible opportunities in 2009.

Financial Services

     Financial services contacts in the District continued to report a slowdown in loan demand. Contacts reported that real estate deals were basically nonexistent except for the very low risk ones. Most contacts have seen a slight deterioration in credit quality, but quality is still stable overall. On some loans, contacts have increased the interest rate by methods such as basing spreads off the LIBOR rather than the prime, and setting a floor on the prime. Depository institutions report maintaining tight credit standards, and most report generally stable deposits. The slowdown in loan demand has been broad-based. Demand has decreased for mortgages and consumer loans, particularly auto loans and credit card issuance and purchase volume. Real estate lenders are very concerned about 2009 while other lenders expect either flat or very modest growth.

Energy
     Oil services and machinery contacts reported that drilling activity has declined in response to lower energy prices. The U.S. rig count slid by 15 percent, or 300 rigs, from the peak in August, with two-thirds of the decline coming in the last six weeks of the year. Texas is down 157 rigs since the peak, and 85 rigs of this decline have come in the last six weeks. Contacts reported that the brunt of the decline is land-based and natural- gas directed. Relatively expensive shale and tight gas led the upturn, and is now leading the downturn as well. Contacts said that offshore and international activity has held up much better, and should continue to do so, based on sponsorship by companies with a longer-term perspective and much deeper pockets.

Agriculture
     The cotton harvest is about 85 percent complete, and yields are lower than expected. Regions in Central Texas are suffering from a severe dry spell. The winter wheat and oats crops and pastureland are in need of rain in most parts of the District. Livestock are in fair condition but supplemental feeding is ongoing due to lack of pasture. Commodity prices have plunged from their earlier peaks but fertilizer prices have not declined as much, leaving farmers with low winter crop prices and high planting costs.

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Developing in High Risk Areas

These days, it seems like news of natural disasters have become more frequent lately. Most of this recently is due to the ongoing 20 year uptick in tropical/hurricane activity. Place on top of that wildfires, tornados, earthquakes, avalanches, blizzards, ice storms, record heat, record cold, floods, droughts, and the list goes on and on, its amazing any of us are even sane enough to live at all. Recently, I read this article on CNN, talking about how the people in the "Last House Standing" in Gilcrist, Texas are celebrating Christmas. Gazing towards the bottom at the comments, it looks like the typical range of responses there. "I can't believe they rebuild on the coast." "I can't believe we allow the government to insure these home." Then of course its done with absolute sarcasm and bitterness towards fellow man. On the other hand you've got those who applaud the rebuilding and stand up/justify their reasonings why they think people should stay, citing every thing from the amount of years they've lived there, to the fact that their jobs require them to work nearby. Then, out of those two primary arguments, a war of words ensues.

First of all, the arguments here are mostly a waste of breath, (or rather typing if you prefer.) But, I guess its the Internet, so we get seemingly unlimited spaces to post our thoughts and we live in a "free country,"  so why not? It's completely absurd to think anyone will actually win an argument. You will rarely see anyone actually concede to another person's point of view. (The one time I actually tried to concede to the other person's point of view, he or she just kept on, so I gave up on that.) And of course, the more the controversy there is, the more impassioned people are to say nasty things thanks to the anonymity of the poster. Plus, I think some people post arguments back and forth against themselves just for the sake of creating buzz about an article. We can't help it, its all human nature, even it is rather silly sometimes and very predictable. I bet I could write a program to simulate post-article commenting to demonstrate. But, I digress, the point of this post isn't to discuss post-article commenting tactics of the public but to address our development in areas that are known to have higher risks of disasters.

No matter where we live on the planet Earth, we are all subjected to some risk of disasters. But, we can all also recognize that some people live in higher risks areas than others. (Or so, our perception and intuition tell us so.) I don't need to do a 10 year study to say that its probably better (from a disaster-survival point of view) to live in an established small town in the heartland of the US vs. living at the base of an active volcano. We always get these routine arguments, but no one is standing around talking about how we should actually go about having people live with this known probability in a way that will have the least economic impact to the rest of us. Most arguments stem around the belief that its either the wealthiest who live on the extreme edges of the Earth (i.e. wealthy celebrities in California getting their houses burned by wildfires), or the most ignorant and impoverished people, who are clueless to the disaster that awaits them (i.e. New Orleans refugees after Katrina), that are always in the middle of these events. Few people place the middle class in these situations, and when it is done, its usually done so with a more justifiable, stance and its usually a disaster that hits everyone of all socioeconomic backgrounds (i.e. earthquake rattles SoCal, or ice storm blankets thousands in New England.) Real quick, it makes sense that the wealthy tend to place themselves in harm's way at "earth's extremes" with mountainside properties in the thick woods or perhaps stilted mansions on the coast, while flood plains are typically really cheap and affordable for the poor. I say to those that are wealthy who loose their homes, tough, I don't want to hear the complaints, because you knew the risks when you built or bought your home. You could even apply this to some middle class folks who are asking for trouble placing their life's savings to live in places where they ought not live. Things are perhaps different for those that are less fortunate. Perhaps its possible that some of these people really are clueless to the possibilities of disaster and as a result are ill prepared when it does happen. You could take this a step further and say that they are aware of the danger, but either lack the means (money) or motivation to evacuate or adequately prepare. Those all seem to make sense (through my white middle-class perspective), but let's move beyond typical places to find where to place the blame.

To dig further in thought, I'd like to focus on those who are living near the coast who are dependent on jobs that are made available because of it's close proximity to the coast, particularly the US Gulf Coast. These jobs could be anything from shipping, to working at coastal refineries to shrimp boating, not to mention all of those people who work in jobs that service those communities (teachers, grocery store clerks, doctors etc.) All of these are jobs are not only important to the local community, but as soon as you think about that last tank of gas that you bought, or the product that used any chemical from plastics to detergents, or the good shrimp you've eaten recently, you realize that those people living on the coast are important to all of us. Now let's assume that most of these people don't live directly within a stone's throw of the oceanside property, but they do still live within harms way. On the Gulf Coast, its quite common for properties 10 to 20 miles from the coast lie no higher than 20 to 30 ft. above sea level. That means that the first 3 or 4 miles inland, those properties are subjected to storm surge from run-of-the mill hurricanes. To overcome this, houses within these areas are built on stilts. That's good, as long as those houses are built to withstand the accompanying winds. For those who live above the storm surge line, you'll still need to have a house built to withstand sustained winds of at least 120 miles an hour. Keep in mind, the saying, "its not that the wind is blowing, but its what the wind is blowing." So even if your house can withstand the high winds, you're still going to need to have a way to protect your house from the debris that's blowing around because your neighbor forgot to tie down his gas grill in the backyard. That sounds great until you find out that building a house large enough for a standard family of 4 or 5 people is too expensive for the refinery worker and the shrimp boat assistant to afford. Throw in the school teacher who lost her husband to war with 2 kids to take care of and you can quickly see where the economic problem lies. Where do these people live, 30 or 60 miles inland? An affordable, but crowded, government subsidized housing complex? Perhaps, if those workers united and asked for higher pay from their employers they could afford those houses closer to work. That sounds good, but now you've got a company that's either going to give in to those demands and simply pass on the costs to its customers, or it'll be forced to relocate over seas or across the border where its more affordable to operate. The bottom line is, we're tied in to those communities' economies, and we're all indirectly responsible for those who live on the coast. And whether its the government or big business that pays the initial up-front cost, we all end up paying for those the costs in the long term either through higher prices or higher taxes (or lost jobs to overseas markets). This is just another example of the hidden costs of products that are priced too low. (You can bet I'll have a blog entry on the hidden costs of cheap goods, imported or otherwise.)

Don't get me wrong, there are some other remedies to the situation. For example, living below sea level, near the coast doesn't make sense and should be prohibited. Why even bother with coastal levies, they're expensive to build and maintain, and when they fail, its disastrous. (If you want to make Death Valley your home, have at it, but I'm not covering the cost of that either.) It also makes sense to do things like allow for natural, undeveloped buffers to exist between the coast and the towns that are economically tied to the sea. This is particularly true for areas near the mouth of the Mississippi and other rivers along the Gulf Coast. These buffers also act to take the blow of a storm surge and can also give some room to allow a hurricane's winds to slow down some before having the chance impact human development. Other things like better levy management upstream to allow silts, which are important to sustaining coastal wetlands, (the needed buffer described above) to build up as they naturally would have done so. Think of the Gulf Coast as being like a cell wall (think Biology 101, not prison). The cell wall needs to be able to allow important materials to pass through, but it also needs to keep the dangerous substances out and help regulate the balance of materials. (Urban development and economics based off of biology will be a future blogging topic as well.) (In fact, someday, I'll be discussing many other systems that are similar to biological structure (such as corporate structures and the movement of goods, people and information in a urban environment.)

Unfortunately, there's bound to be some resort hotel and luxury home owners that will claim that its their right to develop within a stone's throw of the coast. I suppose that limited developments could be allowed, but only if they followed strict development guidelines. Such development must be done at their own expense, never subsidized, nor publicly insured, and must place the value of preserving the natural resources above their own benefit. It would be much like the labels you see on electronics that state that the device that you are using must not interfere with other electronics from a higher class and must receive any interference from electronics from a higher class. The integrity of the coastal buffer must take precedent over the any development directly on the coast, without exception. Certainly there's a lot at stake here, with millions of people and billions, if not trillions of dollars on the line. Its a sensitive subject that pits public policy against private land owners and industry. There is no quick, blanket solution that can be given, while at the same time all cost, hidden or not, should be considered when taking a true measure of the economic impacts of the decisions to be made.

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Economic Turmoil? Why Texas may keep its head above water.

After watching or reading the news, it doesn't take much to get a sense that the economy isn't so bright these days. Never before in my lifetime (only 28 yrs) have I ever encountered such negative, pessimism about the economy.

Here, where I live in North Texas, we seem to barely be holding off the soon-to-be-declared recession that is gripping the nation. Yes, we've been lucky here so far with natural gas royalties and all things Barnett Shale related, but even that opportunity is drying up as natural gas prices plummet, for now. Still, despite that, around here, houses are still being built, albeit, at a slower pace, apartments are still being constructed and hotels are still popping up.

For Texas, there are still lots of opportunities for economic growth. This of course, is assuming that the financial markets continue to see some loosening as Uncle Sam lives up to his promise or buying up bad debts and restructuring the financial industry. Texas has a slight upper hand here as two things go into play: housing prices, which, here, never got over-inflated to begin with, and the fact that Texas has had to endure this sort of thing before relatively recently through the real estate crunch and the savings and loan crisis of the 1980's. Perhaps, because of the learned lessons from that time, Texas banks have been better prepared this time around, and didn't make as many risky sub-prime loans that seemed to have plagued the larger financial institutions of the US. An example of this is Frost Bank, which was bold enough to turn down federal bailout money.

Another important contributor to the health of the Texas economy is due to the diversification of the economy that has developed in the last 20 yrs. When energy prices plummeted in the 80's the Texas economy suffered, and really only rebounded thanks to growth in the technology and service industries. This growth was of course spurred by the relatively cheap cost of business, lower cost of living and the availability of higher education for its citizens. In the early 2000's, when technology peaked, energy prices began steadily rising, resulting in the first significant new growth in the energy sector in over 20 years. This more than offset any losses due to any decline in the IT industry. Texas was also able to maintain generally lower costs of living due to lower housing costs (thanks to the seemingly endless amounts of land available and availability of cheaper labor mostly from bordering Mexico.) Texas has also enjoyed some of the lowest energy and transportation costs (thanks, of course, to the energy industry itself.)

Because of these advantages, along with business friendly laws, many companies and organizations have either relocated their headquarters to town, or they've brought in significant production facilities. With many companies looking to save on their bottom line, I won't be surprised to see more offices opened up down here. Still, there is a possibility that Texas will eventually succumb to the recession forces that are roaming around the land, but even so, it should occur at much less of a blow to the economy than in other states. Texans could all benefit from a slowing of economic growth to give us the opportunity to catch up on building new infrastructure to help serve the growing population. If President-Elect Obama's economic plan is passed through Congress after his inauguration, Texas should stand a good chance to see some funding come from long awaited and overdue projects that we've been needing for years. Hopefully, all states will have a fair share as well, proportional to their needs, but, of course that's all in the eyes of policy makers. Another great opportunity that Texas should benefit from, is from the growing need for "green" energy. If you didn't know otherwise, your intuition would likely give you the idea that this would harm the Texas economy since it has been so dependent on fossil fuels. Thankfully, Texas has not only been blessed with a plethora of fossil fuels, but also a treasure trove of potential green energy sources from biowaste energy in East Texas, to biofuels, such as biodiesel, grown in the open plains of Central Texas, to wind and solar resources in West Texas.
The bottom line here is this: because Texas won't see as severe of an economic downturn as the rest of the nation and since Texas still has a lot of untapped resources that are compatible to our desires to meet our future's greener energy needs, Texas will be poised to take the lead with great economic growth opportunities to economic for the state, which should benefit the rest of the US and the global economy as well. Our abundance of energy will be met however with new demand for it (despite our future gains in conservation and efficiency.) We'll have new needs like desalinating sea water and urban food production along with newer types of transportation to water, feed and move a population that will nearly double in size with each passing generation. The key is for the US to take this economic turmoil and use it to shift gears from a 20th century economy to a 21st century model and that can start right here with Texas.
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New Challenges for President-Elect Barack Obama

What this means to me: First, I'll say that I'm a young man of fairly conservative views and beliefs, and as you can imagine, I lean Republican more times than not. Now that the election is behind us, I find that its time to pray as a nation.


Not solely because Obama won, as we should all be doing the same if McCain had won, but because we, as a nation still face challenges unprecedented to our generation. Beyond those challenges I see glimpses of the bright future that is upon us with many opportunities of growth and development in this nation and world. For those that didn't receive the victory that you had hoped for, this isn't a time to give up and hang low, instead its a time to stand united behind our new President-elect, Barack Obama. It doesn't mean that you need to sacrifice your moral grounds, it simply means that we need to stand united as a nation. Remember, Barack will have to re-earn our votes in 4 years if he is to want to remain as president. He cannot afford to to move the nation any further left( or right), but forward.

The primary challenge is that we need to turn our economy around. We can do this by investing in newer, emerging, domestic technologies such as solar and wind technologies as well as taking the lead in developing newer transportation technologies and by restoring the balance of trade, primarily by reducing our dependence on foreign oil and upon days of prosperity, yet to come, paying down our debt. In this time of an economic downturn, it is time to retool our factories, in all industries, to become more productive through investment in robotics and information technology and of course better training for all workers. In the factories across America, we have lost jobs to overseas, not because we aren't trainable or willing to work, but because it is simply cheaper to operate overseas. The simple reason for this is because we expect more for wages, better working conditions and environmental standards here which were hard fought for in the 20th century. This is why the Kyoto treaty wasn't signed by the Bush administration, because preserving the environment did not, at that time, take precedent over preserving our competitive advantages. Barack Obama will have the tough challenge of maintaining our standards, while not putting us at a competitive disadvantage. Our only answer to this challenge seems to be answered through technology. Unfortunately, this means that factories will have a staff of a few hundred instead of a few thousand. In the long run, this means that we need to continue to strive for better educational opportunities for all Americans young and old. For the short term, that means that we still have jobs to create to those who have labored long hard hours in mills and factories accross the nation. This will be accomodated through the colossal need to build new infrastucture, and need to upgrade existing energy, transportation and water infrastructure in the US. Let's face it, in the same manner that we can't solely drill our way out of the problem, we can't coninue to drive our way out of one either. In the short term, here we will need to build roads, just as we're going to have to use some more traditional energy sources at home to make it another day. In the long term, we'll have to look to and invest in technologies that have been discussed for decades that have seen little development, proportional to traditional methods that we have been using. (These technologies range from mass-transit and on-demand vehicles to water conservation and desalinations and purification.) We must realize that in tommorow's world we will have many more people living, and competing for the same resources. Our goal here is to learn to use these resources as effeciently as possible. We must also encourage the development of these sytems accross the globe to promote peace, because not doing so means facing a rash of violence as nation competes againts nation for resources like clean drinking water.

The economic prosperity and security of our nation and world do indeed go hand-in hand. We still have a lot of work to create or enable free and democratic nations, with fair governments and free will of all people accross the globe. At the same we must be able to defend our own security and democracy. Here, it is true, we must work with our allies and continue to stand against those who strive to harm us and the people they oppress. At the same time, we must help facilitate the growth and propserity of other nations through a democratic system by leading the way by protecting our values at home and abroad and by preserving and promoting free and fair trade. In Iraq, we must not leave until a good transition can be made to allow the Iraqi people to lead themselves and provide their own security. I think we are approching this as the tide of violence continues to decline. Here, I agreed with the troop surge, and without a doubt that it, along with a better stategy utilizing newer technologies, has worked and we cannot afford to withdraw too quickly. In Afganistan, I feel that our values still aren't fully taking taking root, especially in terms of religious freedom. At the same time, we still have terrorists hiding out in the mountains along the Afganistani and Pakastani borders. If there is one good thing that has resulted in Iraq, it is that we've developed more effective technique to counter terrorism and insurgency. Hopefully, we'll be able to use these methods along with a troop surge there to finish our job of destroying Al-Queda's leadership.

Next, we have unprecepented needs in our medical industry and the nation's health as individuals. It astounds me that the medical industry is still so far behind the information technology curve, that long complicated forms must be filled out again and again just for a simple consultation with a doctor for each doctor or facility. Let us work for better standards for information so that medical care can become efficient at healing instead of proficiently maintaining the overly antiquated bureaucratic system that stands today. Here we need to encourage the development of standardized and secured health information. Doing so will not only provide more effeicient care, with less headaches involved in with getting checked in, but it could help prevent medical errors and allow staff members to focus on caring for patients instead of keeping track of volumes of information. We also need to clean up the corruption of the medical industry and politics. It seems to me that we've become a nation dependent on presriptions with side effects and drugs to counter those side effects. At the same time, we see pharmaceutical companies and insurance companies lobbying politicians motivated for profits rather than better care. Profits are indeed important so that companies can grow, but doing so at the cost of patients health cannot be allowed. We need to make sure that the medical indusrty is translucent in the way that they conduct busness and do research. At the same time, we need to make sure that the agencies that have oversight over the process, do so without favors, cronyism, or biased views. Better medicine and care should be driven by science and research and not politics or profit motivations.

Finally, there are moral issues that we face. More on this when I continue at a later time....
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