Baubles for Business

Among the more interesting pieces about the thrill of the grilled cheese sandwich and the Koreas making coy eyes of love to each other, we can find two articles in the NY Times today that reveal a lack of substance at the heart of some internet business models. One can detect an almost fiddle while Rome burns on YouTube ethic to much of this, with seriously brilliant minds brought down to creating the perfectly useless, and timely (as in "not timeless") widget.

In the first piece, we are given the details of how Saturday Night Live created its second comedic hit video on You Tube, with over 300,000 downloads. In mocking Mahmoud Ahmadinejad, the president of Iran, and his statement that Iran is without homosexuals, the video managed to hit the right combination of humor and social commentary, with swipes at pop culture and its earnest yet contrived presentation of nonsense.

It is in fact a funny video, even if you are smart enough to read between Ahmadinejad's eyebrows to know that he is not stupid enough to believe that there are no homosexuals in Iran, but rather, that you will search long and hard before you find someone willing to admit they are. Thus, they don't exist.

In any case we have a laugh at the idea of the head of an oppressive regime brought down to the level of just another nice guy in love. The writers have used his own image-he of the casual jacket and "I love all the existing people" attitude- and taken it a step further, softening him up to the point of a cushion for various rhetorical pins.

Politics aside, we can't argue that with effort expended, and downloads done, this adds not a dime to NBC's bank. The article reminds us that ratings are no higher than the year before. Nobody is really laughing all the way to the bank, which, one would assume, should be the general idea with most business endeavors.

The same can be said about all those companies creating widgets and little add on features for Facebook. The whole world and their collective uncles have come to the conclusion that social networking is the apex of modern internet efforts. Some relatively smart minds are calculating that with just the right combination of luck, lightening, bridge buyers, sunny skies and general delusion, profits will roll in.

The problem is that the more that people are willing to reveal about themselves, the less they are going to want advertisers and others mucking around in their stuff. With Facebook, it offered a particular haven, combining the personal with a largely invisible advertising environment. In the case of the many companies making craplets for Facebook, they are faced with the difficulty of being unable to monetize their work. People will accept something that is free, but ultimately if you are going to make money you either have to offer them something they will gladly put a dollar value on, or convince them to look at your advertising.

To the extent Facebook allows its central interface to get cluttered up, they become just another Myspace. While that may appear to be good now, in the long run, and like every social network before, the fascination will fade. Facebook has the chance to embrace adults who stay with a product if it works, as opposed to the younger audience who will bleat their way to the next new thing out of boredom or the influence of equally bored peers.

In many ways the best minds and the managers of the biggest piles of cash are acting like a new mother spending tons of money on giving her five month old the best wardrobe ever. As if nothing changes and all the new clothes won't be outgrown. In a world with so many unsolved problems and so many possibilities, one wonders if businesses built on adding one more bauble to the crib are worth the attention they receive.

Things Routinely Done Countrywide

In an article in today's New York Times by Gretchen Morgenson titled "Inside the Countrywide Lending Spree", we are given illuminating insight into Countrywide's aggressive lending practices.

Of course it's rather a billion dollars short, and several thousand days late, to call the company and its practices into question, but then again, if we are to learn anything, such stories are still worthwhile. Nevermind that the NY Times itself published its fair share of profiles of people reaching for what we now know is the impossible: the attainment of homes that could not have been achievable via normal methods of honest acquisition or reasonable lending practices.

So there is blame to go around. In the article we learn that:

• Countrywide routinely disregarded borrower assets in order to put them in a class of loans that garnered more fees. (Done no doubt to encourage pride of ownership since the more you pay, the more you value what you have overpaid for).
  
• Countrywide routinely charged blacks and hispanics more for the loans they received. (Because, well, the cost of pigmentation, like other commodities, has been rising around the world. Or, as one recently executed toy factory manager in China said, "Less pigmentation, more lead," when creating action figures).
• Countrywide avoided steering low income and new borrowers toward FHA government loans due to profit considerations. (And because the government has its hands full with Maliki in Iraq, poppies in Afghanistan, and a high number of congressman under investigation. Loan processing times would invariably slow, along with profits).
• Countrywide routinely charged more for mortgage related services than its competitors while verbally suggesting they provided the best loan possible "in the universe". (Or as they probably framed it during weekly team meetings, "High cost value-adds SHOULD cost an arm and a leg and your home")
• Countrywide's head, Mr. Mozilo, routinely purchased zero new shares in the last ten years, while at the same time routinely selling unpurchased shares (options grants) in order to remain highly diversified. (I imagine he will need the extra money to stay out of the big house. Then again, Mr. Mozilo will not suffer the fate of businessmen in China, who, when they mess up, get disposed of, and merely for poisoning the world's pets with funky food. (But oddly, not for poisoning the world's children with lead)).
• Countrywide routinely, right up into February and March, sold piggyback loans, sold loans covering 95% of the appraised price, and loans without income documentation. (Because trusting people is good, and them trusting you is even better, especially when they have no money).
• Countrywide routinely rewarded its employees in its incentive structure for selling high cost, riskier loans. (You cannot argue with compensating employees well, can you? Besides the extra income will be handy when they face the eventual individual and class action suits, or when they get laid off when Bank of America takes over and decides they like inventory and systems more than extra employees).

All of which could have been discovered ages ago if publications that employed journalists did a bit more journalism and a little less lifestyle and aspiration promotion. Or as a journalist in China once said before being killed by the government, "Less Lohan, more leadership (and still no pigmentation)".

Then too, we cannot wholely blame the filthy lucrists at Countrywide, or the reflexively late reporting of the nation's journalists for the situation we find ourselves in.

We must look in the mirror. (We meaning, YOU).

We are either a nation chock full of extremely stupid people, able to be repetitively swindled and swonked, or (and more likely), we are a nation of extremely morally challenged people, willing to shave off a bit of our better judgement or jolly goodness in order to cut ourselves a slice.

Thusly:

• We are routinely willing to lie about our income, or expand on our income, or pretend money does not exist at all, in order to get what we think we deserve. (Proper accounting not being relevent to most things).
• We routinely take on risks under the assumption that income today will be no different tomorrow, except more, but not less. (Or that, all things working for good, the world will end or we will win the Powerball, or the rapture will come, or society will collapse, or our parents will die leaving us money, thus saving us from the decision we made when the mortgage broker ventured into undiscovered laws of math by assuring us that if we signed "here", that our non-income and lifestyle would not be adversely impacted by monthly mortgage payments of $300 that would reset to $4000 dollars after a year if and only if the rare occasion of 365 days in a row occured.)
• We routinely are too impatient to do close reading, perfectly willing to let preachers, teachers, neighbors, email forwards, and loan originators explain to us concepts in one sentence that are better read in full paragraphs and fine print. (Once undone, we mistily recall our long ago desire to graduate kindergarten and go straight to Harvard, only to be held back by dyslexia and complicated stuff like letters and numbers arranged in a sentece on a piece of paper signed by our blood in front of a horned mortgage lender trainee).
• We routinely find ways to cut corners, like piggy backing on other people's credit histories in order to find houses big enough to hold all the stuff we bought with our own credit cards. (Imagining that we can drive over to a bad neighborhood and sell it to the crack addicted for half price, or on Ebay for twice the price, if times get sketchy).

And for those who don't own homes, and who have always had bad credit and lived paycheck to paycheck, but were too honest to fudge their way to greater circumstances, the credit markets salute you. They will never loan to you now, but you have the good fortune of knowing you will have a roof over your head long after the head of Bear Sterns has liquidated his last mortgage fund and played his last game of golf.

3:10 to Yuma

Ostensibly the writing here is supposed to be about our little financial adventure, maybe economics, with a little politics, personal fluff, and ax grinding thrown in, but today I will drift a bit.

When I left the office this afternoon I waited about an hour for the bus. I sipped on a lemon soda and watched the clouds and cars roll by. People were on their way to lunch, or taking walks down the quiet street trying to get in some exercise before heading back to the desk.

It was Phoenix, with the sun lurking, but not too hot, with most of the year's blaze starting to fade and a coolness swaying tree branches and brushing my face.

I was listening to my mp3 player as usual, and put my baseball cap on to remind myself I was free from work. Kelly Clarkson was singing about breaking away. I had added that one song of hers to my music rotation a few days back, though typically I am not a fan of female pop singers. I like bands,and usually male bands that play their own instruments.

As I sat there waiting, I was thinking about emotions. (Well, actually, I was thinking about a lot of stuff, from bills, to money, to why am I in Arizona, to I'm hungry). But mostly I was thinking about emotions, and how for some people it takes disaster, even self induced, to feel like you are alive or in control.

Sometimes you walk through life and there is nothing particularly dramatic going on. You eat, work, sleep, and repetez, with never enough deviation in the day's events or the heart's emotions to make the next day slant off on a different more satisfying tangent.

If you drift long enough in that mode, and do not do something smart and make adjustments, you will find yourself doing something accidentally stupid, and with unintended consequences.

Later in the day I ended up at the Deer Valley AMC theatre seeing 3:10 to Yuma, the story of a humble farmer stepping out of his normal routine to do something slightly different today in order to change the arc of his life. Russell Crowe plays the outlaw, who, near the end and deadened by the pattern of his existence, decides to do something out of the ordinary as well. He chooses to do something good by wiping out his own posse, albeit a move I was not wholly fond of, given their loyalty to him. But he was trying to break a pattern, at least in his own heart, if not in his actual life.

Breaking patterns, removing the auto-pilot, is important, but the method chosen makes all the difference in the world. The right way to set off in a different direction is to plan the correct steps and calculate the cost. The wrong method is to let the subconcious mind or your emotions make you impulsive, where you do in fact change your life, but become like a bottle rocket without a stick, swirling around on fire and with no direction.

That is how it is with most things. There are ways and there are ways. So, for example, it is not enough to do good, but rather, to choose the right good that needs to be done (not all good being approrpiate to the time, the place, or your efforts). In changing your life it matters too how you go about doing it. Change can be good to the extent it is organized change and not merely emotionally driven responses to the status quo.

My bus eventually arrived and I got on, wondering if I was headed in a good direction.