Geography is Destiny: Religion

This fascinating images came my way via Paul Kedrosky:



I read Jared Diamond's "Guns, Germs, and Steel" a few years back, and am also familiar with Edward O. Wilson's population biology. The two have led me to believe that climate and geographic circumstance have a huge impact on social outcomes. And so when I look at that chart, I see that in the tropics, religion is common; and in the temperate zones and in the northern regions, it is far less common.

This does not have to be a direct causal relationship. There is a lot more poverty, disease, and tragically shortened lifespan in the tropics. There is more civil war in the tropics. But it can certainly be an indirect causal relationship, as people wracked by suffering brought about in part by the effects of their climate turn to the solace of the hereafter.

What a fascinating image.

Euro Update: Bond spreads widen

I just got back from a business trip to Europe, and I heard a lot of confirming evidence that the Euro is headed for serious trouble. I think that this also means that Switzerland is headed for serious trouble, because like Iceland, its finance sector is too large compared to its GDP; and without the Euro to flee to, a collapse might occur.

Here's the Bloomberg article via Clusterstock on BlackRock betting that the Euro will stay together.

Prices now reflect odds of between 10 percent and 20 percent that the euro-region will disintegrate following a series of credit downgrades from Standard & Poor’s this month, according to BlackRock. The difference in yields, or spreads, between the three nation’s 10-year bonds and those of benchmark German securities was close to the widest today since the euro’s debut in 1999.

“You have got to ask yourself at what point this becomes ridiculous,” Scott Thiel, head of European fixed income in London at BlackRock, which manages $1.3 trillion, said in an interview Jan. 23.

Actually I have to ask myself when it becomes inevitable, Scott.

That would be the BlackRock whose stock has fallen from 249 to today's 109, BTW.

Goodbye, Euro: Jim Rogers is 7X too optimistic

My top prediction for 2009 is the collapse of the Euro. I think it is a near certainty that within three years, the Euro will no longer exist in any real form, though its shadow may linger on.

The reason is simple: A currency is backed by a social contract ("the full faith and credit of the United States government", for instance) and there are wildly disparate social contracts within the Eurozone. As modern and emerging economies come under great stress, they will react differently according to their own social contracts -- and they will diverge, breaking the Euro. I broadly consider Europe to consist of four different social contracts:

1) Modern social democratic states: Germany, France, Belgium, Denmark
2) Feudal profitable states: Italy and Greece - ungovernable, despite being productive; little of their commerce is captured in their tax base, and their social contract is written at the local and regional level, not as a true nation-state
3) Emerging states with aspirations: Poland, Czech, Hungary
4) "Failure to launch" states: Ireland and Spain, whose economies rocketed from penury to prosperity over the past 20 years, but who are now being exposed as children of the bubble.

A rare public claim that the Euro will break apart came from Jim Rogers today; but his suggestion that it will take 20 years is lengthy bordering on the ludicrous. The Euro has only existed for 10 years; if you think it's under threat now, why would you possible imagine that its remaining life is twice its history? I think that less than half is more likely, and an implosion during 2009 is genuinely possible. I am told by a reliable source that there is already divergence in the debt terms and pricing available for different Eurozone banks, reflecting the early stages of this process. This trend is something to watch closely.

Bizarrely, having created this crisis, America may continue to benefit in an enormous theater of the absurd; there's simply no other plausible choice as a global reserve currency than the dollar in the short term, so despite our foolish and spendthrift ways, the dollar will continue to strengthen.

The problem with partial transparency

Kevin Drum posted an interesting piece about the somewhat creepy public mapping of California Prop. 8 donors:

This sort of thing has been possible for quite a long time, of course, but it was inherently limited in scope because of the time and money it took. Technology has changed that: it probably required little more than a few hours of coding to create a map that identified every Prop 8 donor in the state. And that map isn't only in the hands of the folks who created it. It's out on the internet where it's practically begging to be abused by some nutball... I remain a bit of a privacy crank who hasn't yet been reconciled to the inevitability of David Brin's "Transparent Society."

In demonstration of his point, one of his commentators posted an even more creepy follow-up:

I'm in San Diego, and went poking around my neighborhood. Its San Diego, so sure enough there's a a handful of 500 and 1000 donations by various folks. But, there is one very large one. I thought that odd, so I saw the guys employer, googled him and sure enough, he went to BYU. Now he might not be a [Mormon], but all signs point to yes. In other words, prop 8 passed because [The Mormon church] got its members in Utah and elsewhere to pony over large sums of money.

As a guy whose political donation history and incredibly detailed personal information can readily be found by Googling my name, this sends a shiver down my spine. We joke about 'cyber stalking' and Googling our dates, but a lot of new social infrastructure has yet to be created to make this emerging transparent society work.

Most particularly, the entire point of Brin's great and prescient essay is that a transparent society only works if it's bilateral. In addition to the searcher being able to see you, you can see the searcher. I would be a lot more comfortable with the ease of access to this information, if it was equally easy for me to see that Joe Smith at 123 Main Street, Anytown USA, has been doing hundreds of searches on people in a particular geographic area.



That searcher information is quite trackable today (by Google) but it isn't public without a lengthy and expensive process of law enforcement powers and subpoena or search warrant, whereas the Prop. 8 and other political donor information is both highly trackable and very public.

That lack of symmetry needs to be addressed for a transparent social compact to work.

Visions of the Future: Fred Wilson sees commerce, I see war

As a VC, Fred Wilson is focused on the entrepreneurial opportunity in the commercial part of the spectrum. His take on what sort of interregnum we're in is therefore essentially positive, because within the bounds of that arena, it's clear that this historic ongoing dislocation means that opportunity abounds:

This downturn will be marked in history as the time where many of the business models built in the industrial era finally collapsed as a result of being undermined by the information age. Its creative destruction at work. It's painful and many jobs will be lost permanently. But let's also remember that its inevitable and we can't fight it. Technology and information forces are unstoppable and they will reshape the world as we know it regardless of whether or not we want them to.

'Spectrum' is a good way of thinking about what is going on, and let's call the commercial aspects of the current interregnum and coming change the 'green' part of the rainbow, nicely positioned in the heart of ROYGBIV.


Over there on one edge of the spectrum of the future, I'm spending a lot of time worrying about Red, the color of Mars, god of war.


'Arena' is a word chosen carefully, because commerce is a game played within set rules. The larger struggle is how, and by whom, those rules are set; and that combat both has no rules, and is about to become much more intense. Frail Mercury may sit on the sidelines, or hide in the cellar, while fiercer fights take place.

Why do I feel so strongly that this is imminent? Unrealized to many of us in the west, the beneficial outcomes of the current 'game' of commerce have now been disproven in the eyes of many. Seeing the newly revealed artificial nature of progress and prosperity in the West, does anyone in Nigeria, or Pakistan, or Brazil, or Russia, Malaysia, truly believe that their ladder up through the stages of global capitalism actually has rungs?

If they stop believing that, they stop playing the game, and move on to more fundamental maneuvers. And one of the precepts of those maneuvers is that they must be responded to, which means that only one party's decision is required to set them in motion.

Caught between fundamentalism abroad, fundamentalism at home, and a more prosperous despised neighbor to the east, the current generation of Pakistani leaders no longer believe that they can even rise to the level of prosperity enjoyed by India. What is their next logical move? We're all about to see.

Bob, the word you're searching for is 'Interregnum'

Robert X. Cringely, in his last PBS column:

The world is unsettled. It's not just this damned financial nightmare we have to deal with but also a sense of between-ness, like something has just ended yet still lingers slightly though it is obvious that something new is about to arrive. But will it be a good something new? That's hard to tell.

In past eras we used to have interregnums between the reigns of kings. These days, we see them in the pauses between empires, hegemonies, and technology-driven waves of infrastructure. We're there.



I'll try to get some thoughts posted on waves of technology and deflation over the Christmas holiday. It won't be fun, but it may be interesting.

China May Fall: The Next Big Problem Is Political Risk

We're finally to the point in this unfolding economic crisis where most people are seriously willing to engage with the topic of whether this recession is of the magnitude and danger of the Great Depression. That's far cry from a year or even six months ago, when depending on the skepticism of your listener, using such terminology either raised eyebrows or placed you straight into the tinfoil-hat brigade.

That's a good thing, because once we can talk about something, we can analyze it, manage it, and possibly mitigate it in ways that are really difficult to do when we're in a state of absolute denial.

I continue to be puzzled by how many people view market movements as abstracted from real-world events, as if markets are some pure reflection that has little or nothing to do with the facts on the ground. These sorts of arguments are common when people say, for instance, that the fact that the S&P is now trading at or slightly below its long-term "fair value" means that it's unlikely that stocks will go down further. This is a slipshod presumption because there are whole huge categories of risk that have yet to really be taken into account, just as one year ago, the very real risk of systemic defaults on structured finance obligations across all debt classes had not yet been taken into account.

The thing that is scaring me on an almost daily basis is political risk, and I am amazed that this is not a much larger part of the discourse already. One of the few exceptions that I have seen is Gary Shiller's recent discussion of the possibility of regime change in China. Does anyone remember what happened right after the Great Depression? The answer is World War II, and it's worth remembering that World War II was made up of a number of interlocking wars, with the Japanese, Germans, Soviet Union, British Empire (including India), United States, the French Empire, China, Italy, and many other secondary players (the list is endless but includes most of Asia, all of Europe, and most of North Africa as well as our good friends the Canadians, Australians, and New Zealanders) all throwing their entire military and productive capacity into a struggle of resources, ideology, economic systems, power, and race that the world has not seen before or since.



It is my sincere belief that both the Great Depression and World War II were the direct outgrowths of the protracted collapse of the British Imperial economic order, which first started to crumble with the Boer War in South Africa circa 1900, and whose final death knell was sounded in the late 1950s and early 1960s with the effective end of colonialism. A huge swathe of actual and abstract infrastructure needed to be swept away to prepare the world for a new economic and political system, as the illogical remnants and deep-seated contradictions and flaws of the prior order were exposed, exploited, and exploded. It was an era where the myth of white supremacy was as outdated as the battleship, and in ten years of global struggle (1936 - 1945) and megadeath, the foundations were cleared for what came next.

We are now twenty years since the end of the Cold War in 1989, and we are due for a big war or two. We can get lost in the metaphors of whether what may come would be the equivalent of World War I or World War II. What worries me is that it is coming, and it is coming for both a long-standing reason and a proximate reason.

The long-standing reason is that we have hugely illogical and remnant pieces of global political and economic structure. When the Cold War ended, there was still no effective difference between a telephone company and a national government; paper was still the major form of bureaucratic communication, advertising, and information dissemination; petroleum's energy supremacy was unquestioned; and the vast majority of the world's economy was composed of the US, Western Europe, and Japan.

The core structures of our natural resources extraction, global shipping and trade, transportation systems, energy systems, information systems, and military makeup haven't really changed that much. Tanks, jets, and aircraft carriers still dominate the modern military, though their conceptual resonance with armored knights on horseback in the emergent era of the first firearms grows stronger by the day. Vertically managed corporations still rule the economic landscape, though their resemblance to discredited socialist bureaucracies is as strong as ever. Factories may have moved to China but largely still run just as they did thirty and fifty years ago. Pensions, retirement funds, education, healthcare... the list goes on. The world has changed, and our systems cry out for a reboot. Such rebirth - renaissance - turning of a new leaf, the turning of a globe, revolution - is inevitably painful, miserable, and destructive. I'm not calling for it; in fact I fear it -- but I am predicting it.

That is the general cause.

The proximate cause is quite simply poverty. Material poverty, poverty of spirit, and poverty of ideas. In perilous times, rulers fall; and rulers who may fall will do anything that they can to maintain their tenuous grip on power. The most logical move in the world is for a ruler to focus inward anger outward; to create or highlight a wrong or an enemy, and unite a populace against that cause. The wrong may be true, or it may be constructed; there may be a valuable prize to be gained (such as resources) or war may simply drive domestic political benefit. But as sure as the sun rises, right now, threatened rulers in many halls of power are contemplating wars of many kinds. In retrospect it becomes a difficult question whether the rulers led the people to war, or whether the populace demanded rulers to lead them there; once a politician puts himself at the head of a parade, who is to say whether a pull or a push is in progress?

But in either case the war happens.

The political risks of our current crisis are practically immeasurable; they are easily as profound as those extant in the decade leading up to WWII.

* China faces domestic unrest that may cause it to implode.
* The EU faces internal schisms that may cause it to break apart.
* Africa faces an existing tide of lawlessness and poverty, and spark-points such as Zimbabwe, that may draw much of the continent into varied forms of bloodshed
* I will be shocked if India and Pakistan don't have a war in the next decade, and relieved beyond expression if that war doesn't go nuclear
* The United States will face its own serious domestic discontent, as it has the most to lose from the dissolution of the current world order
* A nuclear-armed and belligerent Russia is about to be impoverished by the collapse of oil prices. The last time that happened was 1989, and the Soviet Union fell.
* The many petroleum-fueled autocracies of OPEC face similar threats - and many are well-armed
* South America has large states with little petroleum -- Brazil, Argentina, and Chile -- and small states with a great deal of petroleum -- Colombia and Venezuela.

Even leaving aside additional sources of potential stress such as drought and declining food and water supplies brought on by climate change and overfishing, there is such ample opportunity for global disaster here that it's hard for me to imagine that the coming decade will be peaceful.

In terrible recessions, markets don't trend 50% below their "fair value" for abstract reasons. They do so because the outlook for the future at those dark, bleak times is truly terrifying.

I fear that we will see those times again.

Calling All Pirates!

An article I read on Bloomberg today sent of all of my "looming unintended consequences" radar into turbo overdrive. It's about the spread between current and futures oil prices, apparently called Contango, and the fact that this spread is so unusually large right now -- $41 current price vs. $55 December 2009 futures contract, so $14 per barrel -- that it's actually cost effective to:
a) rent a supertanker
b) borrow enough money to buy a Buh-Buh-Billion dollars worth of oil
c) anchor said tanker offshore somewhere and
d) physically deliver the oil a year hence.

Some Oil Dude in London is reliably quoted as saying that this strategy should deliver 11% profits over the forthcoming year, which looks pretty darn tasty when Ye Olde Worlde is ending all around us, and Treasuries are paying less than 1%.

The reason that my looming disaster radar is going Beep! Beep! Beep! is because as sensible as it sounds, this is just the sort of nothing-can-go-wrong "auction off our lottery and our turnpike" sort of thinking that has gotten us so deep into our current financial crisis.

So for those who habitually stomp through graveyards, the foolish of all stripes, and investment bankers in particular, here's a short list of what could go wrong with this strategy, from the likely to the formerly absurd:

* Bankruptcy and/or default of whoever is sitting on the other end of that billion dollars worth of futures contracts. I can certainly imagine that entity either having gone under in the normal course of business 12 months from now, or seeking bankruptcy protection to avoid paying what could literally be $500 million worth of additional costs, if oil is at $28 instead of $56 when December '09 rolls around. Since every contract we can imagine has turned out to be worth the equivalent of toilet paper over the past 12 months, what's to say that oil delivery futures contracts won't suffer the same fate?

* Storm and/or other damage and destruction of the tanker and the oil. Sure, there's insurance against such things. Insurance companies are just SO financially stable these days, and happy to pay billion-dollar losses rapidly and fully, don't you agree? (cough) AIG (cough).

* Pirates and terrorists, oh my! The article goes on to say that as many as 16 supertankers may be booked for such use; which means that they'll be sprinkled around the globe in all sorts of locations, ripe to be hijacked, blown up, spirited away, or other malfeasant use.

Seriously, what really gets my hackles up (in fear not in anger) is that this sort of stupidly rational strategy is the height of "the system works" thinking, which assumes that a long complex interlocking string of contracts will be honored. Let's look at the string here:
* A current contract to buy a billion dollars of oil
* A loan to finance a billion dollar purchase
* Rental of a supertanker [and crew?]
* Insurance on the tanker and the oil
* Some sort of anchoring rights [or the knowledge where to anchor in international waters]
* A futures delivery contract for the oil

Think that anything could go wrong here? See any arcane interconnection of previously uncorrelated financial instruments and indices? Worried about the odds that at least one single thing in this long chain will go slightly wrong, in a world where Things Going Wrong has lately proven to be the approximate statistical equivalent of the sun rising in the east?

Nah. Count me in. Pirates be damned -- 11% sounds awesome!

PS. 2:1 leverage for 22%? Anyone? Hello, calling 2006... anyone?

Local Search: Every Brick is a Survey

One of my investors, David Carlick, is a pioneering thinker in online advertising. David was a founder of DoubleClick, and has been a leading proponent of behavioral advertising. He is fond of saying that "every click is a survey," and that pithy phrase captures a lot about how the aggregate of human behavior can be turned into knowledge.

I've been thinking about local for a few years now, and I'm increasingly obsessed with the kind of ranking intelligence that can be derived from the physical map of cities. Most of the features of cities - streets, buildings, transit systems - are not there by accident. Rather, they are the accrued choices of generations of human beings, a physical record of millions of discrete building and buying and selling decisions, made over decades or centuries.

In truth, every brick is a survey.

Here's a very simple example: What's the most expensive and valuable part of Vancouver? How about the part with the tallest buildings?



If you were told to a) choose a hotel for an urban weekend, cost no object; or b) choose a prestigious location for your multinational headquarters, you could do far worse than to point to the high point on the implicit value graph of the skyline and say, "here."

There are hundreds of other examples too lengthy to record at 6am UK time, which is when this urge to blog has struck me. Unpacking this latent ranking intelligence in physical reality is a very interesting and potentially lucrative search problem, one that I'm looking forward to working on for years to come.

Inflation and Deflation are the Same Thing

What?! you say. Ethan has a screw loose. Inflation and deflation are opposites!
Au contraire, mon frere.

In practice, inflation and deflation are effectively the same thing. Inflation is "you have lots of money but it isn't worth anything" and deflation is "money is worth a lot but you don't have any."

In either case, massive social and economic dislocation occurs. And the same crisis can simultaneously cause both outcomes - witness during the Great Depression, which created deflation in the United States and hyperinflation in Weimar Germany, both with the same root cause: the collapse of the British Imperial trading order and the decline of the pound sterling as the global reserve currency.

For an orderly and functioning society, the intersection of people having money and that money being worth something is required. I don't think we're heading there, and whether we drive off the right side of the road or the left side, this is going to be ugly.

WaPo's David Broder joins the Wooster, OH election beat

Well, look at that. David Broder of the Washington Post stopped by Wooster Ohio to discuss the election, too. Welcome to my beat, David ;-)

My Mom emailed me with the story, and told me that she was disappointed that she wasn't in the bustling Obama headquarters when Broder stopped by:

Two local women at the tables -- Cullen Naumore and Catherine Wiandt -- heard Sen. Joe Biden when he spoke in mid-September at the College of Wooster. Naumore had never thought of volunteering in a campaign, and Wiandt had abandoned politics, disillusioned, after working for Democrats in her younger years. Now they are part of a volunteer force that Litt estimates at "100 per week and growing." Two others are Jessica Schumacher of Lexington, Ky., and Sarah Green-Golan of Boston, respectively a sophomore and a senior at the College of Wooster. I met them on campus and heard how they and their friends had persuaded 700 of their fellow students to register in Wayne County, where the Republican presidential margin has ranged from 11,000 to 12,000 votes in the past two elections."It's going to be different this time," they assured me.

Yes, times change. And people change them.

How times change

When I was growing up on a farm outside of Wooster, Ohio, my parents used to gently mock the city values of the county seat, where, astonishingly, a Democrat was mayor. Wooster's population then was about 18,000, and it's the sort of place with a gorgeous courthouse, empty streets, and 'family values' signs in the windows of businesses downtown. Berkeley it ain't. But from the comparative conservative high ground of the countryside, it seemed like a suspicious hotbed of liberalism.

This year, my Mom, now moved to town, is going door to door for Obama.

Times do change. And it's people who change them.

Breaking News: Obama is a socialist, Ethan still voting for him

There's a tempest in a teapot brewing over in right-wing land over this quote from Obama on a 2001 radio talk show:

"One of the I think the tragedies of the Civil Rights movement was because the Civil Rights movement became so court focused I think that there was a tendency to lose track of the political and community organizing and activities on the ground that are able to put together the actual coalitions of power through which you bring about redistributive change and in some ways we still suffer from that."

If you think that the word 'redistributive' means he's a socialist, well, sure, game over, he's a socialist. But then you probably think FDR was a socialist, too, and I think that he and Ronald Reagan were the two greatest presidents of the last century.

The simple fact is that all of society benefits when there's a floor at the bottom and no ceiling at the top. FDR built the floor, and fifty years later, Reagan fixed the ceiling problem. Now, 25 years later, it's time to repair the floor, and in 20 or 30 years, some new Reagan can come along and fix the ceiling which by then will no doubt need repair.

I'd have voted for both FDR if I were alive and Reagan if I were of age, and I'll be voting for Obama and no doubt for Reagan's future successor to come. Management is mostly about pragmatism, and oversight of management is mostly about choosing the right guy for the problem. FDR, Reagan, and Obama are all that guy, and I'm looking forward to contributing my small voice to the process of choice in a week's time.

Portrait of a market in distress

If you had any doubt that we live in interesting times, check out this amazing stock chart:

That's Japan's Nikkei 225 average over the past 5 trading days. It looks like it was drawn by a five-year-old who doesn't understand the concept; since when are stock charts made up of straight lines and gaps?

Even more interesting is that this is an *average* of 225 stocks. Isn't diversity supposed to even out fluctuations? The entire world financial system is now learning the painful lesson discovered by Long-Term Capital Management in 1998 -- that in edge and corner cases, entire asset classes, and multiple asset classes, can unexpectedly be deeply correlated, with the result being severe dislocation. Condos in South Florida and the Icelandic Krona -- who knew?

Everyone who hasn't yet read Nassim Taleb's _Black Swan_, get busy. It is well on its way to being book of the decade.

Goodbye, Hedgies!

"For the $2 trillion hedge fund industry, a long-feared shakeout is at hand. Some analysts say one out of every 10 funds could fold."

Seriously? News flash, NYT: When an illiquid asset class that grew on excess leverage and irrational hopes of profit collapses, you'll be lucky if one out of 10 survives.

Ask me how I know.

Fortunately, there are useful things for all those unemployed quants and asset managers to do.

MBA and law students, please do something useful

This is probably the most depressing thing that I've read all week:

For students who set their sights on Wall Street during the boom years, the end has come just as they are getting ready to join the party... But even as the markets spiraled downward, business and finance students at top universities said they were not panicked about their futures and were confident that the financial markets would recover. For the young achievers drawn to finance, expectations die hard. [Kenton] Murray, [a senior at Princeton,] described the mood at Princeton as cautiously optimistic. No one I’ve talked to is worried about moving back home yet,” he said. “But everyone I know is studying for the LSATs right now, people who a month ago had no intention of ever going to law school.”

Jian Yang, 25, who is in his second year at the University of Chicago's graduate business school...expects to graduate with $200,000 in student debt.

Ye Gods.

Part of the reason that we got into this mess is that too many bright people are doing relatively useless things like investment banking and lawyering. Another key reason that we got into this mess is that once any entity -- from an individual person to the Federal Government -- gets themself under a massive pile of debt, their options are highly constrained. Prison may be more crushing than debt service; but it may not, because in prison, you don't have to spend your sentence productively.

To all the MBA students out there -- please don't double down on this historic mis-allocation of resources. If you are quantitative enough to consider finance, look into data mining and machine learning for product and marketing design and refinement. Translation: search relevance and ad targeting; but these are only the tip of the iceberg. Soon these disciplines will spread, because they add real value both to consumers and to merchants. Operations research for resource allocation is another huge area. The world is undergoing another historic transition now, which is toward connected, data-driven marketplace of real stuff -- not the fake packaged stuff that has been driving Wall Street for the past seven years. You won't ever get a $500K bonus working in this field, but you'll make a good salary, you'll add to the productive economy, and if you join (or start) the right company, you'll get rich beyond Wall Street dreams of avarice -- and deservedly so.

To all the law students out there -- if you are articulate and nuanced enough to consider law, how about a management or leadership career? The world needs more thoughtful communicators and accomplished managers. Running a team is a lot harder than running a trial, but much more rewarding. Understanding and influencing the people who work for you and who struggle to work together is a lot more interesting than navigating a jury selection pool. Negotiating a business partnership is a lot more fulfilling than a litigation settlement. I see the insides of hundreds of organizations that we partner with, and good management and leadership is all too rare. You too can make an enormous difference to the productive economy by refocusing your talents elsewhere. Are we electing Barack Obama president because he's a good negotiator? Or because he's a great leader, communicator, and manager? You know the answer. Be that answer.

And to all of you - please, please be careful about getting yourself buried under a mountain of debt, such that you end up having to work at a career that you may hate, in an industry that may not really provide anyone lasting value, simply because you are crushed by your debt service. I'm sorry, but if it takes $200K in debt, then whatever your parents told you about getting into that 'top school' is probably wrong. The ROI to your life is negative. I flunked out of one top school and left another before completing my PhD, and I was neither struck by lightning nor am I begging on a street corner. If you're truly smart, talented, motivated, and capable, you'll do fine.

There's a lot of broken economy to fix. Let's get to work.

So where did all that housing money go? You already spent it

The size of the numbers is staggering -- $700 billion here, $900 billion there -- and a lot of people are wondering how it's possible that seemingly every bank and every homeowner is suddenly broke.

There have been clear signs for a while that something was amiss in the housing and consumer consumption market, and one great indicator is Mortgage Equity Withdrawal, or MEW.

This is, quite simply, the net amount of cash that people pulled out of their houses to spend on Other Stuff -- either by a home equity loan or, in the case of retirement, selling an expensive house and buying a cheaper one. The financial blog Calculated Risk reports, buried in an article about the collapse of MEW, that U.S. consumers pulled $2.7 trillion out of of their houses during the five years from 2004 through 2008:

Equity extraction was close to $700 billion per year in 2004, 2005 and 2006, before declining to $471 billion last year and will probably be less than $100 billion in 2008.

While some of that might have been spent on the houses themselves, in the sensible form of new bathrooms or additions, a lot of it was spent on questionable upgrades like granite countertops and flat-out expenditures like flat screen TVs, Hummers, and vacations to Fiji. So the reason that all those Wall Street banks are going bust? Because they thought that you -- or your neighbors -- were actually going to pay back the inflated mortgages that backed up that giant sucking sound of the home ATM in overdrive.

For those of you who protest (as I do) your innocence, realize this simple fact: Even if you didn't do such an extraction yourself, whatever business you are in benefited from the huge increase in consumer spending that this MEW generated over the past four years. Retail, manufacturing, advertising, financial services, construction... we all lived a little or a lot better.

And now, not only is it gone, but we've got to pay it back in the form of systemic collapse, higher taxes, or inflation. None of us were as wealthy as we liked to pretend over the past four years, and now we're all going to be a lot poorer than we're ready to admit.

Zvents raises $24M for local & mobile search

It has been pointed out to me that for a blog ostensibly about things other than Zvents, there's been hardly anything but Zvents news here of late.

Separately, it has been pointed out to me that for a life that is ostensibly about other things in addition to Zvents, I've been doing precious little but work of late.

To you my blog readers let me say that this is the last Zvents post for quite a while; and to you my friends and family let me say... hang in there, it can't stay this crazy for ever.

That being said:

Zvents raised $24M in funding from Nokia Growth Partners, AT&T, Navteq, and our existing venture investors Vantage Point and Red Rock. We will use this money to make our local search service for our media network even more awesome; advance our very promising new local ad model; and as a warm, fuzzy security blanket against the slings and arrows of outrageous fortune.

Lots of people are writing about our round, including VentureBeat and Paid Content, as well as local gurus Pete Krasilovsky of Kelsey and Greg Sterling.

AT&T even issued their own press release about their strategic investment in Zvents.

How did we manage to raise all that money in tough times for both VCs and startups? Is there a pony in there somewhere? Forbes lays out a nice explanation.

And now... back to work building the future of local search.

The Google Alphabet: 23% of top search terms are local

Brady Forrest has a nice post over at O'Reilly Radar about the 'Google Alphabet,' the top suggested search terms for each letter. He makes a bunch of interesting historical observations, but through my local lens I noticed something different:

23% of top search terms are local.

The list:

Craigslist
Ikea
John Lewis (a UK retailer)
Sears
Target
Zipcodes

6/26=23%. You could argue that 'Kelly Blue Book' is a 7th, but you could also argue that there are some ecommerce implications to some of the retailer name searches, so we'll call it a wash.

Local search is very big business.

Update: I posted this to my blog and checked out how it looked, and lo and behold, the very first local event for today in the SF Bay Area displaying on my Zvents left sidebar widget was 'Target Free Sundays' at the Asian Art Museum. Apparently retailer Target is sponsoring Sunday museum admissions as a local marketing tool. Yet another example of local merchants using events to promote their businesses.

Zvents news: Too much to ignore!

I've got a list of interesting topics right here on my desk, on a couple of increasingly tattered Post-it notes.

There's the 'Poker Analogy' post for machine learning-driven processing of log data.
There's the 'Match.com Analogy' post for how search is a collaborative process.
There's the 'Spice Rack' post on building search relevance.
And there's the 'Smart Delivery of Dumb Objects' post about ad targeting.

In addition to these four fascinating posts (trust me ;-) I've got at least two really cool related product ideas moldering on that same little collection of decaying desktop notes.

So what's keeping me from fulfilling my bloggy destiny? As usual, Lots Is Happening (I almost typed Happyning... can your fingers create malaprops?) at Zvents.

Today's particular news is that as our marketing VP Paul O'Brien has noted at length, we're launching dozens of campus guides for MTVu, powered by Zvents local search. It's gotten a ton of press, written by people less busy than I -- check it out!

Substantive posting will resume in September. I think.