First, while the Mexican government has lost control over matters having to do with drugs and with the borderlands of the United States, Mexico City’s control over other regions — and over areas other than drug enforcement — has not collapsed (though its lack of control over drugs could well extend to other areas eventually). Second, while drugs reshape Mexican institutions dramatically, they also, paradoxically, stabilize Mexico. We need to examine these crosscurrents to understand the status of Mexico.

Let’s begin by understanding the core problem. The United States consumes vast amounts of narcotics, which, while illegal there, make their way in abundance. Narcotics derive from low-cost agricultural products that become consumable with minimal processing. With its long, shared border with the United States, Mexico has become a major grower, processor and exporter of narcotics. Because the drugs are illegal and thus outside normal market processes, their price is determined by their illegality rather than by the cost of production. This means extraordinary profits can be made by moving narcotics from the Mexican side of the border to markets on the other side.

Whoever controls the supply chain from the fields to the processing facilities and, above all, across the border, will make enormous amounts of money. Various Mexican organizations — labeled cartels, although they do not truly function as such, since real cartels involve at least a degree of cooperation among producers, not open warfare — vie for this business. These are competing businesses, each with its own competing supply chain.

Typically, competition among businesses involves lowering prices and increasing quality. This would produce small, incremental shifts in profits on the whole while dramatically reducing prices. An increased market share would compensate for lower prices. Similarly, lawsuits are the normal solution to unfair competition. But neither is the case with regard to illegal goods.

The surest way to increase smuggling profits is not through market mechanisms but by taking over competitors’ supply chains. Given the profit margins involved, persons wanting to control drug supply chains would be irrational to buy, since the lower-cost solution would be to take control of these supply chains by force. Thus, each smuggling organization has an attached paramilitary organization designed to protect its own supply chain and to seize its competitors’ supply chains.

The result is ongoing warfare between competing organizations. Given the amount of money being made in delivering their product to American cities, these paramilitary organizations are well-armed, well-led and well-motivated. Membership in such paramilitary groups offers impoverished young men extraordinary opportunities for making money, far greater than would be available to them in legitimate activities.

The raging war in Mexico derives logically from the existence of markets for narcotics in the United States; the low cost of the materials and processes required to produce these products; and the extraordinarily favorable economics of moving narcotics across the border. This warfare is concentrated on the Mexican side of the border. But from the Mexican point of view, this warfare does not fundamentally threaten Mexico’s interests.

{ George Friedman | Continue reading }

{ Elliott waves. Bull Market: Left to centre. Bear Market: Right to centre. | The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. | Wikipedia | Continue reading }

…most of the headlines were about the wrong e-mails. When Goldman Sachs employees bragged about the money they had made by shorting the housing market, it was ugly, but that didn’t amount to wrongdoing.

No, the e-mail messages you should be focusing on are the ones from employees at the credit rating agencies, which bestowed AAA ratings on hundreds of billions of dollars’ worth of dubious assets, nearly all of which have since turned out to be toxic waste. And no, that’s not hyperbole: of AAA-rated subprime-mortgage-backed securities issued in 2006, 93 percent — 93 percent! — have now been downgraded to junk status.

What those e-mails reveal is a deeply corrupt system. And it’s a system that financial reform, as currently proposed, wouldn’t fix.

The rating agencies began as market researchers, selling assessments of corporate debt to people considering whether to buy that debt. Eventually, however, they morphed into something quite different: companies that were hired by the people selling debt to give that debt a seal of approval.

Those seals of approval came to play a central role in our whole financial system, especially for institutional investors like pension funds, which would buy your bonds if and only if they received that coveted AAA rating.

{ Paul Krugman/NY Times | Continue reading }

It’s hard to get good payoffs from slot machines, yes. But it’s also hard to get good information from slot-machine gamblers, and that made things awkward for psychologists Mark Griffiths, of Nottingham Trent University, and Jonathan Parke, of Salford University. They explained how, in a monograph called Slot Machine Gamblers – Why Are They So Hard to Study?

Griffiths and Parke published it a few years ago in the Electronic Journal of Gambling Issues. “We have both spent over 10 years playing in and researching this area,” they wrote, “and we can offer some explanations on why it is so hard to gather reliable and valid data.”

Here are three from their long list.

First, gamblers become engrossed in gambling. “We have observed that many gamblers will often miss meals and even utilise devices (such as catheters) so that they do not have to take toilet breaks. Given these observations, there is sometimes little chance that we as researchers can persuade them to participate in research studies.”

Second, gamblers like their privacy. They “may be dishonest about the extent of their gambling activities to researchers as well as to those close to them. This obviously has implications for the reliability and validity of any data collected.”

Third, gamblers sometimes notice when a person is spying on them.

{ The Guardian | Continue reading }

{ Designer Patrick Sung’s Universal Packaging System is meant to precisely fit anything that needs shipping. The individual cardboard sheets are scored with a triangle pattern that can either be fitted to an oddly shaped object, or formed into a custom fitted cardboard box. | Fast Company | Continue reading }

Did you know, for example, that when you take the list of Fortune 100 companies in 1966 and compare it with the Fortune 100 in 2006, 66 of those companies don’t even exist anymore? Another 15 still exist but aren’t on the list any longer, while only 19 of them are still there. Similarly, ample research and statistics show that for a variety of industries very successful firms have trouble staying successful.

You could call it arrogance or, more kindly, naivete but there is a certain blindness at play; blindness to the dangers of continuing a previously successful course of action for too long.

How does it happen? Over the years, companies begin to focus on the thing that made them successful (a particular product, service, production method, etc.). Initially that serves them well and they become even better at it. It will also come at the expense of other products, processes, and viewpoints that the company considers less important and off the mark, that are discarded or brushed aside.

As a result, firms are too late to adapt to fundamental changes in their business environments such as new competitors, different customer demand, radical new technologies, or business models. The historical examples of Laura Ashley, Atari, Digital Equipment, Tupperware, or Revlon come to mind.

{ Harvard Business Review/Freek Vermeulen | Continue reading }

Officials from the U.S. Department of the Treasury, the Board of Governors of the Federal Reserve System and the United States Secret Service today unveiled the new design for the $100 note. Complete with advanced technology to combat counterfeiting, the new design for the $100 note retains the traditional look of U.S. currency. (..)

There are a number of security features in the redesigned $100 note, including two new features, the 3-D Security Ribbon and the Bell in the Inkwell. These security features are easy for consumers and merchants to use to authenticate their currency.

The blue 3-D Security Ribbon on the front of the new $100 note contains images of bells and 100s that move and change from one to the other as you tilt the note. The Bell in the Inkwell on the front of the note is another new security feature. The bell changes color from copper to green when the note is tilted, an effect that makes it seem to appear and disappear within the copper inkwell.

{ Federal Reserve | Continue reading }

It was followed in late 1936 by Life, the picture magazine, which was an astonishing newsstand success: “By the end of 1937 . . . circulation had reached 1.5 million — more than triple the first-year circulation of any magazine in American (and likely world) history.” But then, as throughout much of its existence, Life was troubled by high production costs and insufficient advertising revenues.

Luce’s empire grew to include “The March of Time,” first a radio broadcast and then a newsreel for theatrical distribution, and finally, in 1954, the slow-growing but eventually phenomenally successful Sports Illustrated.

The empire was called Time, Incorporated, a name that no longer exists. In 1990 — 23 years after Luce’s death — it merged with Warner Brothers and has since been known as Time Warner, a partnership that has seen its rough times but is now “one of the three largest media companies in the United States.” It is “a powerful and successful company, although the magazine division that had launched the company [is] weakening fast in the digital world of the twenty-first century.” Time, which was required reading in the ’30s, ’40s and ’50s, even for those who detested it, seems now to be waiting-room reading; Fortune retains relatively strong circulation but seems primarily known for its “Fortune 500″ rankings; and Sports Illustrated, though still widely read, is no longer noteworthy, as it once was, for superb journalism that at times reached the lower rungs of literature.

{ Washington Post | Continue reading }

{ Sam Potts, A Tax Form for the Marginally Employed | Enlarge | Thanks Colleen! }

Goldman Sachs Group Inc was charged with fraud by the U.S. Securities and Exchange Commission over its marketing of a debt product tied to subprime mortgages that was designed to fail.

The lawsuit is the biggest crisis in years for Goldman, which emerged from the global financial crisis as Wall Street’s most influential bank. (…)

The SEC alleged that Paulson & Co, a major hedge fund run by billionaire John Paulson, worked with Goldman in creating a collateralized debt obligation, and stood to benefit as its value fell, costing investors more than $1 billion. That is roughly the amount that Paulson is estimated to have made by betting against the CDO.

{ Reuters | Continue reading }

Buildings consume more energy and materials than any other human activity – a reality that, for decades, has fueled interest in any improvements able to save energy and reduce costs. As energy prices continue to rise and resources dwindle, interest in “green buildings” has sparked a growing industry. According to a new report from Lux Research, the market for energy saving green buildings technologies will expand from $144 billion today to $277 billion in 2020, representing a 6.1% compound annual growth rate (CAGR). (…)

“The developed world’s 728 billion square feet of residential, commercial, and government floor space account for nearly 40% of its primary energy use, and consume 72% of its electricity,” said Michael LoCascio, a Senior Analyst at Lux Research, and the report’s lead author. “But while there’s increasing interest in cost-saving green building technologies, the market remains poorly defined.” (…)

The report focuses on energy-saving green building technologies, and examines the prospects for more than thirty “established green” and “emerging green” technologies, based on primary interviews with engineers, contractors, architects, and technology suppliers, as well as rigorous secondary research of technology development and pricing trends. Among its key conclusions:

1.) The energy-saving equipment category will gear up to reach $146 billion in 2015. The market’s largest segment, green building equipment, comprises lighting, HVAC and water heating systems; as well as energy-generation technologies, such as rooftop solar, building-integrated PV, and combined heat and power systems. The segment represented an impressive $67 billion in 2009, but new growth in LEDs, smart lighting, and advanced heat technologies will help sustain a 7.3% CAGR through 2015.

2.) The services segment will deliver the most robust growth. The green services category encompasses energy service companies (ESCOs), demand response, building energy management, and smart meters. In 2009, it represented only 11% of the green building market with $16 billion in revenues. But strong expansion of emerging technologies, like demand response, will expand the segment’s revenues to $55 billion in 2020, reflecting a robust 12% CAGR.

3.) Materials are the slowest growing segment, with a few bright spots. Energy-saving green building materials, such as insulation, windows, and structural materials amounted to $62 billion in 2009; the segment will reach $75 billion in 2015, a relatively slight 2% CAGR. Emerging technologies to watch, however, include electrochromic, thermochromic, and thermoreflective windows, which control how much sunlight windows admit.

“The adoption cycle for green building technologies is comparatively long, and growth will rely in part on subsidies,” said LoCascio. “The biggest driving factor, however, is straight-up economics. Technologies that can provide a payback in three years are more likely to be adopted by commercial building owners. Those providing payback in five years, however, are still attractive for government buildings.”

{ Josh Wolfe, Weekly Insider, April 9, 2010 }

Lines at the grocery store might become as obsolete as milkmen, if a new tag that seeks to replace bar codes becomes commonplace.

Researchers from Sunchon National University in Suncheon, South Korea, and Rice University in Houston have built a radio frequency identification tag that can be printed directly onto cereal boxes and potato chip bags. The tag uses ink laced with carbon nanotubes to print electronics on paper or plastic that could instantly transmit information about a cart full of groceries.

“You could run your cart by a detector and it tells you instantly what’s in the cart,” says James M. Tour of Rice University, whose research group invented the ink. “No more lines, you just walk out with your stuff.”

{ ScienceNews | Continue reading }

logotype { Forest Young }

Most people in most places simply won’t be able to find a toilet when they need one. And for women, the lack of decent facilities is more than a problem. It’s an emergency. Public conveniences are the final battleground in the sex wars, the ultimate declaration of discrimination. (…)

You may think of America as the country that created the allergy, where bathroom culture rules, where germs and dirt are feared more than global warming and where cleanliness is worshipped alongside godliness – but public conveniences in some of its major cities are a disgrace. New York City, for example, is one of the most sophisticated metropolises in the world. Yet its provision of any public toilets at all, let alone clean and decent ones, is woeful. (…)

Today, there are still far fewer public toilets for women than for men in many British cities, in terms of both the number of toilets available and the ratio of male to female facilities. But even if the numbers were more equal, that wouldn’t solve the problem, according to the American sociologist Harvey Molotch, because women suffer “special burdens of physical discomfort, social disadvantage, psychological anxiety” when in public.

{ New Humanist | Continue reading }

photo { Stephen Shore, New York City, New York,September-October 1972 }

{ The patterns of links between buyers and sellers of sex in an online forum differs in important ways from other internet related networks, says a new study. This may have important implications for the spread of sexually transmitted diseases | Patterns of Captured in Social Network | full story }

update/related { A top journalist caught on tape with a pile of cocaine and a party girl named Moomoo, an opposition activist filmed handing over a bribe… Who’s behind the spate of mysterious coke-and-hooker entrapment attacks on Russian opposition figures? The Daily Beast | full story }

In 1968, The MPAA created the Classification and Ratings Administration (CARA) to designate films with one of four ratings: G (general audiences), M (mature audiences), R (children under sixteen years old not admitted without parent or guardian), and X (children under seventeen years old not admitted). Three years later M became PG (parental guidance suggested). In 1984, in response to violence in the movie Indiana Jones and the Temple of Doom, the film review board instituted the new PG-13 rating, which cautions parents that the film’s contents may be inappropriate for children under age thirteen. In 1990 the board responded to criticism that the X rating unfairly categorized artistic adult films, such as Midnight Cowboy, with hard-core pornography. In that year the board replaced X with NC-17.

In the movie business, a better rating is generally a lower rating. Movies typically make more money when they appeal to the widest possible audience. This rule holds true particularly with motion picture video sales. Many video outlets limit their inventory to movies with ratings no higher than PG-13 or R. Some theaters refuse to show movies with the NC-17 rating, and some newspapers refuse to carry advertisements for movies with the NC-17 rating. A movie studio therefore wants its film to earn the least restrictive rating possible.

One exception to this general rule is the marketing of pornographic films. Because studies have suggested that sexually explicit films become more desirable when they are restricted, the pornographic film industry voluntarily labels its films X or XXX in an effort to increase sales. XXX is a marketing tool, not an actual MPAA rating.

{ Answers | Continue reading }

We live in a world of complex systems. The environment is a complex system. The government is a complex system. Financial markets are complex systems. The human mind is a complex system—most minds, at least.

By a complex system I mean one in which the elements of the system interact among themselves, such that any modification we make to the system will produce results that we cannot predict in advance.

Furthermore, a complex system demonstrates sensitivity to initial conditions. You can get one result on one day, but the identical interaction the next day may yield a different result. We cannot know with certainty how the system will respond.

Third, when we interact with a complex system, we may provoke downstream consequences that emerge weeks or even years later. We must always be watchful for delayed and untoward consequences.

The science that underlies our understanding of complex systems is now thirty years old. A third of a century should be plenty of time for this knowledge and to filter down to everyday consciousness, but except for slogans — like the butterfly flapping its wings and causing a hurricane halfway around the world — not much has penetrated ordinary human thinking. 

On the other hand, complexity theory has raced through the financial world. It has been briskly incorporated into medicine. But organizations that care about the environment do not seem to notice that their ministrations are deleterious in many cases. Lawmakers do not seem to notice when their laws have unexpected consequences, or make things worse. Governors and mayors and managers may manage their complex systems well or badly, but if they manage well, it is usually because they have an instinctive understanding of how to deal with complex systems. Most managers fail.

Why? Our human predisposition treat all systems as linear when they are not. A linear system is a rocket flying to Mars. Or a cannonball fired from a cannon. Its behavior is quite easily described mathematically. A complex system is water gurgling over rocks, or air flowing over a bird’s wing. Here the mathematics are complicated, and in fact no understanding of these systems was possible until the widespread availability of computers.

One complex system that most people have dealt with is a child. If so, you’ve probably experienced that when you give the child an instruction, you can never be certain what response you will get. Especially if the child is a teenager. And similarly, you can’t be certain that an identical interaction on another day won’t lead to spectacularly different results.

If you have a teenager, or if you invest in the stock market, you know very well that a complex system cannot be controlled, it can only be managed. Because responses cannot be predicted, the system can only be observed and responded to. The system may resist attempts to change its state. It may show resiliency. Or fragility. Or both.

An important feature of complex systems is that we don’t know how they work. We don’t understand them except in a general way; we simply interact with them. Whenever we think we understand them, we learn we don’t. Sometimes spectacularly.

{ Michael Crichton | Continue reading }

About 3,000 New York City taxi drivers routinely overcharged riders over two years by surreptitiously fixing their meters to charge rates that would normally apply only to trips outside the five boroughs, according to the city’s Taxi and Limousine Commission.

The drivers’ scheme, the commission said, involved 1.8 million rides and cost passengers an average of $4 to $5 extra per trip. The drivers, officials said, flipped switches on their meters that kicked in the higher rates, costing New York City riders a total of $8.3 million.

The 1.8 million fares represent a tiny fraction of a total 360 million trips over the 26-month period in question.

{ NY Times | Continue reading }

photo { Terry Richardson | Related: After two models spoke out about Terry Richardson’s alleged sexual misconduct on shoots, Jezebel asked readers to write in with any stories they may have about the prolific photographer. | NY mag | full story }

MOMA’s founding director and “intellectual creator” viewed Johns’ first solo show at Leo Castelli and telephoned MOMA curator Dorothy Miller to come right over so they could select works. They purchased Johns’ 1954 Flag, Green Target, Target with Four Faces and White Numbers (thus anointing the 28-year-old into the modernist pantheon).

{ Art Net | Continue reading }

Rauschenberg opened up the possibilities that are now being mined by contemporary con-artists such as Damien Hirst, Mike Kelley, and Jeff Koons. Rauschenberg didn’t poeticize the ordinary. He aggrandized the ordinary, he put a high-art style price tag on the ordinary.

{ The New Republic | Continue reading }

$12 million, that’s how much Damien Hirst’s famous shark sold for in 2005. …. It’s not just about the work of art; rather, the value placed on a particular work derives from how it feels to own that art. Most art dealers know that art buying is all about what tier of buyers you aspire to join, about establishing a self-identity and, yes, getting some publicity. The network of galleries and auction houses spends a lot of its time, money, and energy giving artworks just the right image. Remarkably, buyers support the process in the interest of coming out on top, rather than fighting it and trying to get the lower prices. ….

art critics don’t matter much anymore. If the magazine Art in America pays $200 for a review article, why listen to that writer? We have a much richer and generally more accessible guide to the value of art — namely the market itself. ….

Damien Hirst is now worth more than Dali, Picasso, and Warhol were at the same age, put together. The point isn’t whether, in aesthetic terms, he deserves that compensation. The question is whether this way of organizing the art market makes overall sense.

{ NY Sun | Continue reading }

Earlier this year, hedge-fund millionaire Daniel Loeb made a sweet trade. The 43-year-old partner at Third Point LLC had purchased a rare asset in 2003. He found a buyer in January and sold it for a 500% profit, making a quick $1 million. …

Hedge-fund managers are reinventing the art of the art deal. With their sudden riches, quest for status and big houses in need of adornment, fund managers have become some of the most active buyers and sellers in the art world.

They have been buying up hundreds of millions of dollars of paintings, sculptures and pop-art installations. They have helped turn middling artists into media stars. … where others see art, many fund managers see another market ripe for trading, buying, selling and flipping. Many invest heavily in one or two artists, to build up a “position.” They promote the value of the artists, help boost their prices and sometimes later unload pieces through a tax-favorable gift or sale.

{ WSJ | Continue reading }

“Who makes that kind of money in the stock market?” said Sender, 38, as he swiveled round the 21 screens at his desk in New York. “In the hedge-fund business these days, you’re having a great year if you make 20 percent.”

Sender revamped his hedge fund Exis Capital Management Inc. last year, returning some investors’ money after losses in 2004 and 2006. Meanwhile, the value of his art, with works by Richard Prince, Mike Kelley and Andreas Gursky, has continued to rise, quadrupling in 10 years.

Art is now his biggest single asset — 800 works that Sender values at more than $100 million. He said he recouped most of the $25 million he spent in the past 10 years on art with the sale of about 40 pieces.

Sender is a new type of financier collector, with Steven Cohen and Daniel Loeb. Their gains on works by Prince and Martin Kippenberger aren’t just dumb luck in a boom. They apply rules for buying art, as well as stocks.

Sender tries to buy the best works of artists he admires, whose pieces also are being acquired by museums and other collectors.

{ Bloomberg | Continue reading }

When a big-name artist has a gallery show at a big-name gallery like White Cube or Gagosian, his best paintings aren’t even on public view: “The new buyer has little chance of even seeing the hot paintings, which will be kept in a small private room. What is hung in public areas is available for purchase but of lesser significance.” ….

One of the things which fascinates me about the recent run-up in contemporary art prices is that it’s meant a huge change in the way that many artists work: it’s commonplace nowadays for artists to have dozens of assistants, something which was a decidedly unusual and controversial practice back in the days of Warhol. With prices for new works regularly breaking into seven figures, art has become bigger and more polished; it often uses much more expensive materials and can draw on resources which would have been unthinkable 15 years ago.

{ Portfolio | Continue reading }

To Mr. Galenson markets are what make the 20th century completely different from other eras for art. In earlier periods artists created works for rich patrons generally in the court or the church, which functioned as a monopoly. Only in the 20th century did art enter the marketplace and become a commodity, like a stick of butter or an Hermès bag. In this system, he said, breaking the rules became the most valued attribute. The greatest rewards went to conceptual innovators who frequently changed styles and invented genres. For the first time the idea behind the work of art became more important than the physical object itself.

{ NY Times | Continue reading }

artwork { Ellsworth Kelly }