This is in Germany which has a better record than the US with regards to infrastructure maintenance. Naturally, in the US, we just wait for the inevitable.

What started this post was the humorous note in the IRJ June 2011:

The reopening of the 107m-high Müngstener bridge over the River Wupper, which has been closed for renovation, has been delayed because of a miscalculation. German Rail (DB) had forgotten to include the weight of passengers in the train weight.

The larger story makes it a little less funny.

Here are five facts that Treasury Secretary Timothy Geithner offered in a speech in New York Tuesday (May 17 2011) as “context for the [fiscal] choices we must make now to preserve room for important investments in our future.”

• In the U.S. today , 40% of children born each year are covered by Medicaid. If you are born today in hard-pressed communities in many American cities, like St. Louis or Baltimore, you are more likely to die before your first birthday than if you were born in Sri Lanka or Belarus.
• In education, we’re losing ground…. In Los Angeles, only about half the kids graduate from high school.
• Over the next 25 years, the number of Americans eligible for Medicare and Social Security will nearly double, while the number of working age Americans will only increase by about 10%, putting substantial new burdens on working Americans.
• We spend $700 billion a year on national security… about two-thirds of what we spent as a share of our economy during the Cold War.
• The effective income tax rate for the wealthiest Americans—those earning more than $250,000 a year—is at its lowest level in 50 years. And the effective rate for the very rich—those earning over $10 million per year— has declined much further and is now around 21%.

Of course the only proper solution is to increase the taxes on the poor and lower the taxes on the comfortable.

So I ordered, A few days later…

For over a month now I have been paying for everything with coin! No bills, no credit cards. The only exceptions have been my transit card and online transactions, including the coin purchase. $100 dinner, all in coin! $180 drug prescription – all in coin! Babysitting? coin!

Instead of carrying a wallet I now carry a money bag! People have asked about the weight. A $1 coin weighs about 8g so a $1000 weighs about 17.6 pounds. $50 dollars weighs about a pound. This must be horrible! Actually, no:

1. I carry my laptop with me anyhow so an extra pound is not horrible.
2. It is easy to control spending, carrying the extra weight means I just take exactly what I am willing to spend and no more. Really easy to stay in budget when all you have is coin!

The reactions have been all over the place:

• “Are these quarters?”
• “Are they collectables?”
• “Are they gold?” ( Uncirculated $1 coins are shiny )
• “What? Fine.” (And then dumps them in the drop safe)
• “Are they real?”
• “Do I have to take them to the bank?”
• “I love them, you are taking Caltrain, right?” (Coffee house)
• “We don’t pass them out as change.” (Safeway)
• “Sounds like a good idea but don’t you have to spend time converting them to bills?” (Safeway manager – apparently the idea of using money as money is a new concept)
• “I am going to give them to my wife” (A waiter who bought up the $100 in $1 coins that we paid for dinner with)
• “My company gives them out as a sign of good luck during the New Years.”
• “I am going to give these to my kids in the Christmas stockings”

Clearly, the Mint has a ways to go in the educational department, if cashiers are uncertain if the $1 coin is even money!

This program is a great deal for consumers. This is a cash advance through the U.S. government! WTF? Yeap! Lets look at a “traditional” cash advance:

1. Go to bank
2. Present credit card
3. Ask for $1000 in cash.
4. Get $1000 in cash
5. Pay credit card bill of $1000 + super cash advance high rate of interest (25%).

Now a U.S. Mint cash advance:

1. Go to U.S. Mint website.
2. Enter Credit card information
3. Ask for $1000 in coin
4. Get $1000 in coin (5-7 days later)
5. Pay credit card bill of $1000 + low purchase interest rate ( 0% if you pay in full )
6. Get cash back from credit card company for “purchase”

This is also a great deal for the U.S. Government as well:

The intended purpose of the Circulating $1 Coin Direct Ship program is to make $1 coins readily available to the public, at no additional cost, so they can be easily introduced into circulation—particularly by using them for retail transactions, vending, and mass transit. Increased circulation of $1 coins saves the Nation money. The immediate bank deposit of $1 coins ordered through this program does not result in their introduction into circulation and, therefore, does not comply with the intended purpose of the program.

According to the Bureau of Printing and Engraving, $1 bills last only 42 months in circulation:

A $1 coin will last 25 years, 7 times longer than a $1 bill. This lifespan difference would mean that replacing the $1 bill with the $1 coin would save the U.S. government $500 million, however:

The Government Accountability Office’s (GAO) stated potential [ANNUAL] savings of up to $500 million in a report issued in September 2002, which was calculated on the premise that the U.S. government cease production of the paper dollar bill. However, the Native American $1 Coin Act of 1997 and the Presidential $1 Coin Act of 2005, which authorize both the Native American $1 Coin and the Presidential $1 Coin, do not call for the elimination of the paper dollar which is produced by the Bureau of Engraving and Printing. Consequently, dollar coins and dollar notes co-circulate in the marketplace.

(Update: ANNUAL was confirmed with a tweet from us mint)

Unfortunately, Safeway is not helping. My local Safeway is just sending the $1 coin back to the bank. This is my letter to them.

The US Mint is trying to increase the circulation of the $1 Coin through the $1 Coin Direct program. ( http://catalog.usmint.gov/webapp/wcs/stores/servlet/CategoryDisplay?langId=-1&storeId=10001&catalogId=10001&identifier=8100 )

On this page, the U.S. Mint states:
“The intended purpose of the Circulating $1 Coin Direct Ship program is to make $1 coins readily available to the public, at no additional cost, so they can be easily introduced into circulation—particularly by using them for retail transactions, vending, and mass transit. Increased circulation of $1 coins saves the Nation money.” ($500 million according to https://answers.usmint.gov/app/answers/detail/a_id/164 )

I have spent numerous $1 coins at my local Safeway and other retailers. However, I recently discovered that my local Safeway is taking the $1 Coin OUT OF CIRCULATION by continuously not using the $1 Coin for change. I urge Safeway to change this policy. I furthermore urge that the automatic change dispenser be altered so as to issue $1 coins in addition to the quarters, dimes, nickels and pennies.

Please help save our government money and use the $1 coin as currency!

One final note, do NOT help out the U.S. Mint by destroying $1 bills, it looks to be illegal (18 U.S.C. § 333 : US Code – Section 333: Mutilation of national bank obligations):

Whoever mutilates, cuts, defaces, disfigures, or perforates, or
unites or cements together, or does any other thing to any bank
bill, draft, note, or other evidence of debt issued by any national
banking association, or Federal Reserve bank, or the Federal
Reserve System, with intent to render such bank bill, draft, note,
or other evidence of debt unfit to be reissued, shall be fined
under this title or imprisoned not more than six months, or both.

As as been pointed out in a series of comments on techcrunch ( I would post the link to the techcrunch post except with facebook comments I can’t use google to find the comment thread any more),

1. No business pays sales tax for the goods they sell, businesses just collect sales on behalf of the taxing agencies.
2. Services such as taxcloud make compliance trivial with a in-the-cloud API service
3. States are working to stream line the definitions of what is subject to sales tax, so compliance is further simplified.
4. Internet companies are not being asked to pay taxes to states and local governments that they don’t use.
5. Internet companies are being asked to collect sales tax from the consumer who does use the state and local government services.

Therefore sales taxes ARE being paid by the beneficiary of the person/company being taxed – the person recieving the goods is the person paying the tax. Amazon’s refusal to collect a tax that Amazon is not actually paying is now even more galling. Amazon suffers no financial impact except to connect with a service such as taxcloud, adding the sales tax to the purchase and then sending the tax collected quarterly to each of the 50 states. So a company the size of Amazon is whining about 200 extra checks a year having to be sent? Get over it, Amazon and collect the tax already! Or is Amazon’s business model so fragile that it can’t take the hit?

Original post in which I fall into the trap of thinking that Internet businesses are paying sales tax:

Once again Internet VC’s just don’t get the real world. Brad Feld is of that “illustrious crowd” with his latest post

(Update: Sometime I need to take a breath before I post antagonistic sentences like the above, especially since I do not know Brad. In my defense, I have dealt with a long list of technophiles that think the solution to every problem involves more technology. These same technophiles don’t spend time to understand the needs of people who are tech-indifferent. But since I don’t know Brad personally, I can’t say that for certain about Brad. However, Brad’s statements that I quote below lead me to believe he is a technophile who does not understand technophobes or techno-indifferents.)

it’s just evidence that organizations like Downtown Boulder, Inc. don’t really understand the actual business economics of having a vibrant entrepreneurial community in their downtown.

This is an interesting statement about an organization that existed for businesses before the internet. Suddenly, Downtown Boulder, Inc. “doesn’t understand business and entrepreneurial communities”? How incredibly egotistical! Has Brad ever tried to understand a business in Boulder? Has he even run (or worked in) a brick and mortar store? Rather than try to understand the businesses in his own community – Brad feels like he is privileged to lecture them?

I would be willing to bet that Brad enjoys the Boulder community and downtown created by Downtown Boulder, Inc. Brad is in Boulder because of their work, not the other way around.

Lets look at some of the events listed on the DBI website:

• Winter Sidewalk Sale
• Fashion Under The Flatirons
• Tulip Fairy & Elf Parade
• Taste of Pearl
• Bands on the Bricks
• Noon Tunes
• Open Arts Fest
• Fall Festival
• Munchkin Masquerade
• Switch on the Holidays
• St. Nick on the Bricks
• Lights of December Parade

Under, First Fridays, this organization is clearly giving back to the community:

Boulder Creative Media-Plex – 1906 13th Street Suite 101 (downstairs)
1/2 block off the Pearl Street Mall

First Friday January 7th, 6 – 9pm: Art for the People – The art of ZMA, The Art of Sexy

Boulder Community Media (BCM) is a Colorado based 501(c)(3) organization dedicated to democratizing media and making it accessible to all. BCM provides artists of all ilks opportunities for the community to see their work.
BCM provides the Boulder Creative Media-Plex as a 5,000 sq ft venue in downtown Boulder for digital and visual artists to convene and collaborate.

Where is Foundry mentioned? So Brad bitches about the Downtown Boulder, Inc. but yet, DBI is creating a community and Brad Feld is contributing ….nothing…..

Why should DBI listen to him? Brad contributes nothing and offers little.
Pop quiz: Did the great Boulder downtown attract Brad or did Brad create the great downtown?

Continuing Brad Feld’s self-imposed victimhood,
Brad doesn’t bother to understand taxes

There is no basis for amazon paying state sales tax as they don’t use
any state or local resources! Presumably thats what the sales tax is
for, not to protect local merchants.

Excuse me?????

Brad, here is a partial list of local resources that Amazon directly BENEFITS from:

Amazon (and all other internet based stores) do use and depend on local resources to be able to sell:

1. The highways and airports used to deliver the goods ( contrary to popular myth, gas taxes only pay 51% of the road system cost). Poor roads increase deliver cost and decrease both reliability and timeliness.
2. Police protection: (paid for in part by sales tax!)
   1. Amazon is getting the benefit of police protection of the shipment. Quite simply, Amazon can ship something and have reasonable certainty that the package will in fact arrive.
   2. If the package is stolen enroute, Amazon gets the benefit the Colorado legal authorities will investigate the robbery.
   3. If Amazon shipment is robbed, the Colorado prosecutors will actually pursue an arrest and conviction.
   4. Fraud protection and prosecution
3. Fire protection
   1. The distribution warehouse used by Amazon shippers meets fire code regulations. ( local Colorado tax dollars at work. )
   2. If there is any sort of fire, the local fire department will be available to put the fire out. ( no tax dollars, no firemen )
4. a reliable electrical infrastructure
   1. its hard to for customers to connect to the Amazon website if the power keeps dropping out.
   2. electricity is produced in power plants which require their own fire/police protection
   3. power plants produce pollution. Or maybe Brad would like some dirty brown clouds (Colorado gets most of its power from coal-fired plants)
5. garbage /recycling systems used to process the packaging waste products
6. the e-waste problem from the batteries and printed circuit boards.
7. the brake dust and smog generated by the UPS delivery trucks

Take any of these benefits away and Amazon’s business falls apart.

Some basic rebuttals to some counter-arguments:

• The shipping company (UPS/DHL) pays taxes “on behalf of the shippers” and therefore Amazon shouldn’t have to:
  1. This argument moves the goal posts. The question is does Amazon derive any benefit from the local services and resources. Any taxes UPS pays is irrelevant to the question of Amazon’s benefiting from the local Colorado taxes.
  2. The shipper does not care too much about fraud. Amazon shipping something to a Colorado business or resident and then not getting paid is not UPS’s problem. The package was delivered, UPS expects to be paid.
• Amazon only uses services that would be already supplied. This relies on the “single drop of beer” argument. ( A guy goes into a bar and asks the price a drop of beer. Bartender: ‘free’. Man: please fill my mug with drops of beer.) The reality is the individual effect may be small but everyone needs to contribute to the commons otherwise we have the Tragedy of the Commons
• Amazon should only pay for an (itemized list) of local services that it directly uses. Really? Quick.. list every government service that you and your family use…. Did you remember:
  • Police
  • Fire
  • County Weights and Measures – the people who make sure that a gallon of gas is not 7/8 of a gallon
  • Water and Sewer – or do you prefer outhouses
  • Planning departments – or maybe it is o.k. if the house next door is replaced with a 30-story office building?
  • Parks and Recreation
  • Public Schools – yes I am sure your kids go to the best private school. If it helps to think of public schools as a place to store other peoples kids so they are not robbing your house, feel free to.
  • Courts
  • Prisons
  • Highway department
  • Search and Rescue

How about if the internet companies stop feeling so entitled and started contributing?

1. PARKING

   Because parking:

   1. is negative-revenue land usage ( costs to build/maintain/ generates no revenues or taxes )
   2. is NOT required for high-ridership. Palo Alto and Mountain View both have Caltrain ridership that vastly exceeds available parking. So limiting parking does not limit low ridership.
   3. costly: $35,000+ / parking stall in construction cost

   THEREFORE, Mountain View should :

   1. audit/survey of all parking lots on all parcels larger than 10 spots.
   2. determine if Shoreline office complexes and Shoreline Ampitheatre have parking lots that are consistently at less than maximum utilization. Map the excess parking.
   3. Identify mechanisms to utilize existing parking more efficiently to free up space for HSR passengers. For example,
      1. by increasing transit access to concerts
      2. enable Shoreline office complex landowners to lease part of their parking lots for HSR passenger usage.
      3. Utilize parking cash-out to reward local employee transit use.
      4. enable office complexes along the LRT line between Yahoo! and Evelyn LRT station to lease parking lots for HSR passenger usage.
   4. make walking/VTA MORE convenient than driving to the station. Bus/taxi connections should be positioned closer than the nearest parking spot.
   5. existing infrastructure should be utilized before building new: specifically the LRT line connecting Mountain View with parking lots and employers in north Sunnyvale.
   6. Take a wait and see approach. Minimize new construction, identify locations for possible parking to be constructed and then WAIT to see if the actual demand exists. 200+ affordable apartment units were torn-down to build BART 3,000 car parking structure in Millbrae. It sits empty most of the time.
   7. All new parking should be priced to cover the cost of construction and maintenance. Determine a pricing mechanism that will make any new parking places self-sufficient – Mountain View should not subsidize Los Altos residents driving to station.
2. RIDERSHIP DISTRIBUTION numbers are suspicious and should be questioned.
   

   Source		Boardings or Alightings
   Auto-dropoff		2,200
   Auto-park		2,400
   Rental car		740
   Taxi		680
   Transit		800
   Walk		1000

   Specifically, only 1800 HSR riders are coming from transit and walking. 4,600 riders are driving to the station. The “1800 from transit” number is significantly less than the number of existing Caltrain and VTA riders at the Mountain View station. Mountain View should control its own destiny and build a station that PROACTIVELY guides how people should access the station. If Mountain View builds a car-centric station, Mountain View will have a lot of car trips. If Mountain View builds a transit-centric station the riders will walk or take transit to the station. Proper schedule integration with LRT, Caltrain, VTA busses and community shuttle busses could easily reduce the number of car trips, congestion, and the need for parking

3. INCLUSIVE HIGH-VALUE STATION:
   1. right now the first 4 blocks of Castro are high value
   2. Moffet on the other side of Central is low value.
   3. Access to downtown from north side of Mountain View is difficult and dangerous for pedestrians ( Central + tracks)
   4. World-wide train stations are extremely desirable retail space filled with small shops.
   5. Land within 1/4 mile and 1/2 mile has high-value potential and should be reserved for high-value uses.

   THEREFORE,

   1. Mountain View should design a station that makes Mountain View an attractive DESTINATION.
   2. Mountain View should look to maximize land value. All land within 1/2mile of the station should be zoned to uses that increase sales tax revenue/property tax revenue.
   3. Mountain View should construct a 2+-story station/retail mall that utilizes the air rights over Central and Moffet to connect the underutilized Moffet Ave area to the rest of downtown Mountain View.
   4. Retail spaces should be integrated to the station and the Central/Moffet bridging (Similar to Vallco shopping center)
   5. Mountain View explore closing the Castro street crossing and turning the first 2 blocks of Castro into a pedestrian mall ( essentially make the Summer Thursday night street closing permanent )
   6. Integrated residential/extended-stay facility integrated into the station: A commute that consist of taking an elevator to the station is highly attractive and should be explored. Extended-stay facilities would also be useful for out-of-town people with relatives in local hospitals.
   7. A senior citizen assisted living facility should be integrated considered. Such a facility would allow seniors direct access to transit without requiring a car.

Paul Rubin’s falsehoods:

Paul Rubin’s First Falsehood

1) Privacy is free. Many privacy advocates believe it is a free lunch—that is, consumers can obtain more privacy without giving up anything. Not so. There is a strong trade-off between privacy and information: The more privacy consumers have, the less information is available for use in the economy. Since information helps markets work better, the cost of privacy is less efficient markets.

Its not that “privacy is free” anymore than “freedom is free”. Privacy is the right to not be watched all the time. Clearly the groups working on privacy are expending time and energy. Does not sound free to me.

But lets take a closer look at the fallacies.

Fallacy #1.1 : “consumer privacy means the economy has less information” and “information helps the markets work better”.

Paul does not make a case that the consumers’ private information is the information needed to make the markets work. He just says consumers give less information and that information is needed for an efficient economy.

Fallacy #1.2: “helps”

How much value is derived from the consumers private information? Notice that Paul himself is fudging with that wussy word “helps”. Does the economy function 10% less efficient? 5%? 3%? What exactly is the realized benefit to the economy?

Fallacy #1.3: The consumer realizes some benefit

Does the consumer giving up the information realize any tangible value? Or is the economic value realized only to the recipient of the information. Most transactions involve an exchange of value. Does the consumer realize anything of value? How many sites ask for private information and then offer nothing useful. Or worse turn out to be scam sites.

Paul Rubin’s Second Falsehood

2) If there are costs of privacy, they are borne by companies. Many who do admit that privacy regulations restricting the use of information about consumers have costs believe they are born entirely by firms. Yet consumers get tremendous benefits from the use of information.

Think of all the free stuff on the Web: newspapers, search engines, stock prices, sports scores, maps and much more. Google alone lists more than 50 free services—all ultimately funded by targeted advertising based on the use of information. If revenues from advertising are reduced or if costs increase, then fewer such services will be provided.

Fallacy 2.1: Uncle Sam is counting on you! Give up your privacy or the world will end!!

This assertion is simply ludicrous. I know it is sooooo last century, but does anyone remember broadcast TV? maybe radio? Did everyone remember to “register” with your favorite FM station before listening to the free music?

Of course not! Did the advertisers refuse to advertise on radio for the last 70 years because they didn’t have targeted information about the listeners? How about newspapers? Of course not!

Clearly the economy managed to function quite well without demanding private information from consumers.

Fallacy 2.2: News flash: advertising revenue is already down. And it ain’t because of privacy groups.

The basic economics of online advertising is flawed. There is simply so many places to display ads that the value of each display ad even on a popular site like Facebook is in the range of about $0.00002 ( yes, Dorothy much less than a penny) And this is for a site like Facebook which has a lot of private information about its users.

Fallacy 2.3: News flash: Advertisers can use the information

Reality here is that most ad buyers still have very limited mechanisms to segment their target audience: sex, approximate age and that is about it.

All that detailed information the consumer is being asked to give up? for the most part unused.

Fallacy 2.4 The companies depend on the information they are gathering to make enough money to stay in business and without the information the companies will disappear.

Completely without substance. Companies that fold in Silicon Valley go out of business for many reasons. The most common reason is spending all the invested capital before figuring out how they will make money. Viable internet companies don’t go out of business. Once an internet business becomes cashflow positive, the company is successful. Consumer privacy issues have never changed a viable internet business into a failure. The more usual case is that in spite of gathering all this private information, the company couldn’t figure out how to make money with the information.

Paul Rubin’s Third Falsehood

3) If consumers have less control over information, then firms must gain and consumers must lose. When firms have better information, they can target advertising better to consumers—who thereby get better and more useful information more quickly. Likewise, when information is used for other purposes—for example, in credit rating—then the cost of credit for all consumers will decrease.

Fallacy 3.1: Fallacy of the win-lose by implication scenario: “consumers have less control over information, then firms must gain and consumers must lose.”

Paul is arguing the inverse here. He is implying a falsehood, if “consumers have more control over information, then firms must LOSE”. Apparently, Paul can not imagine a scenario where firms manage to function without the consumers’ private information. Paul really needs to revisit the economic history of this country. Maybe Adam Smith can help him out. Once again, the economy managed to function without privacy being invaded.

Fallacy 3.2 Red Herring: Credit scores are not an online privacy issue.

Credit gathering for the purpose of issuing loans are a specific transactions already covered by consumer law. Online privacy is all about information gathering that is not needed for a specific immediate transaction.

Paul Rubin’s Fourth Falsehood

4) Information use is “all or nothing.” Many say that firms such as Google will continue to provide services even if their use of information is curtailed. This is sometimes true, but the services will be lower-quality and less valuable to consumers as information use is more restricted.

For example, search engines can better target searches if they know what searchers are looking for. (Google’s “Did you mean . . .” to correct typos is a familiar example.) Keeping a past history of searches provides exactly this information. Shorter retained search histories mean less effective targeting.

Fallacy 4.1: Google does not need past history to correct a search.

I have search history turned off. And I have had no problems. If this is indeed such a problem for google, then every library patron who searches the internet from a public computer must have this “problem”. After all my search for “butterflies” is going to be blended with the search history of every other library patron.

Fallacy 4.2: The “lower” quality is some how meaningful

At a certain point, additional precision is meaningless. For example, if you ask your kids where they are, is it really more useful if they reply “I am 3.4 meters from the front door facing to 3degrees to the north, sitting down.” or if they say “I am at home”.

Paul Rubin’s Fifth Falsehood

5) If consumers have less privacy, then someone will know things about them that they may want to keep secret. Most information is used anonymously. To the extent that things are “known” about consumers, they are known by computers. This notion is counterintuitive; we are not used to the concept that something can be known and at the same time no person knows it. But this is true of much online information.

Fallacy 5.1 “Anonymous data”

It is relatively easy to deanonymize data. Netflix was forced to cancel their second planned contest because it was demonstratively easy to deanonymize the Netflix data. This was in spite of Netflix doing their best to prevent exactly that. So a motivated company trying to anonymize can’t do so. A less motivated company is going to do better?

Fallacy 5.2 Deanonymizing takes a lot of effort.

In fact, zip code, age, gender deanonymizes 87% of all data. Anyone asking “Happy birthday! How old are you?” at your birthday party has enough information. Netflix is now facing a lawsuit about this.

The suit is also asking the court to stop Netflix from launching its promised second contest to improve the recommendations — this time giving out user data that includes ZIP codes, ages and gender, along with movie ratings and ID numbers substituted for user names.

That’s a foolish idea on Netflix’s part, according to University of Colorado law professor Paul Ohm, who in a blog post in September called the idea “a privacy blunder that could cost millions of dollars in fines and civil damages.” Ohm, a former Justice Department lawyer, recently authored a legal paper calling into question the practice of anonymizing data, essentially finding that if data is useful to researchers, it could also, by definition, be re-identified.

Read More

I think Netflix would disagree with Paul Rubin.

Paul Rubin’s Sixth Falsehood

6) Information can be used for price discrimination (differential pricing), which will harm consumers. For example, it might be possible to use a history of past purchases to tell which consumers might place a higher value on a particular good. The welfare implications of discriminatory pricing in general are ambiguous. But if price discrimination makes it possible for firms to provide goods and services that would otherwise not be available (which is common for virtual goods and services such as software, including cell phone apps) then consumers unambiguously benefit.

Fallacy 6.1 Price discrimination is o.k. no matter what it is based on.

Paul Rubin is willfully ignoring Redlining:

Redlining is the practice of denying, or increasing the cost of, services such as banking, insurance, access to jobs, access to health care, or even supermarkets to residents in certain, often racially determined, areas.

The term “redlining” describes the practice of marking a red line on a map to delineate the area where banks would not invest; later the term was applied to discrimination against a particular group of people (usually by race or sex) no matter the geography. During the heyday of redlining, the areas most frequently discriminated against were black inner city neighborhoods. Through at least the 1990s this practice meant that banks would often lend to lower income whites but not to middle or upper income blacks.

Reverse redlining occurs when a lender or insurer particularly targets minority consumers, not to deny them loans or insurance, but rather to charge them more than would be charged to a similarly situated majority consumer.

Paul Rubin, as a economics professor you should know about Redlining.

Paul Rubin’s Seventh Falsehood

7) If consumers knew how information about them was being used, they would be irate. When something (such as tainted food) actually harms consumers, they learn about the sources of the harm. But in spite of warnings by privacy advocates, consumers don’t bother to learn about information use on the Web precisely because there is no harm from the way it is used.

Fallacy 7.1 Consumers understand and are willing participants in giving up their privacy.

The Facebook privacy policy is longer than the U.S. Constitution:

If you guessed the latter, you’re right. Facebook’s Privacy Policy is 5,830 words long; the United States Constitution, without any of its amendments, is a concise 4,543 words.

Considering how vague the Facebook policy is, most consumers have no idea what the meaning of the policy is.

Fallacy 7.2 : Ignorance means permission.

Presuming that consumer ignorance is because there is no harm is a huge leap. The consumer has no ability to ask Google, Netflix, or Yahoo for an exact list of who got their information. No phone number to call, no email address that will be responded to. Even a motivated consumer is in the dark.

Paul Rubin’s Eighth Falsehood

8 ) Increasing privacy leads to greater safety and less risk. The opposite is true. Firms can use information to verify identity and reduce Internet crime and identity theft. Think of being called by a credit-card provider and asked a series of questions when using your card in an unfamiliar location, such as on a vacation. If this information is not available, then less verification can occur and risk may actually increase.

Fallacy 8.1 Gathering information reduces fraud.

The opposite is true. By having more private information stored on more computers at more companies there are more opportunities for hackers to gain access to the information. The hackers only need to penetrate the company with the weakest security.

Paul Rubin’s Ninth Falsehood

9) Restricting the use of information (such as by mandating consumer “opt-in”) will benefit consumers. In fact, since the use of information is generally benign and valuable, policies that lead to less information being used are generally harmful.

Fallacy 9.1 : “The information is valuable but not really.”

If the information is so valuable, why shouldn’t consumers be allowed to protect it?

Paul Rubin’s Tenth Falsehood

10) Targeted advertising leads people to buy stuff they don’t want or need. This belief is inconsistent with the basis of a market economy. A market economy exists because buyers and sellers both benefit from voluntary transactions. If this were not true, then a planned economy would be more efficient—and we have all seen how that works.

Fallacy 10.1 Advertising doesn’t work!

Do I really need to say more? Advertising has no ability to induce demand. Women with 300 pairs of shoes really need and want 300 pairs of shoes.

Paul Rubin’s Upcoming Falsehood!

Coming next week, Paul Rubin will write an article about the evils of cash purchases. Paul will explain how cash purchases deprive desperately poor banks of needed purchase information.

I might add more later but enough with the pustulance!

Update ( 30 aug 2010 ) : Apparently the NYTimes has noticed that consumers really do care about online privacy:

“Retargeting has helped turn on a light bulb for consumers,” said Jeff Chester, a privacy advocate and executive director of the Washington-based Center for Digital Democracy. “It illustrates that there is a commercial surveillance system in place online that is sweeping in scope and raises privacy and civil liberties issues, too.”

“The emissions were a significant factor” in the decision to cancel the runway-building plans, Teresa Villiers, Britain’s minister of state for transport, said in an interview. “The 220,000 or so flights that might well come with a third runway would make it difficult to meet the targets we’d set for ourselves.” She said that local environmental concerns like noise and pollution around Heathrow also weighed into the decision.

Robert Cruickshank over at the California HSR Blog whines about Palo Alto’s “undemocratic” democratic process:

In short, it is becoming increasingly clear that Palo Alto’s planning and citizen engagement process is a failure, distorting true public opinion by favoring a small, vocal elite at the expense of a silent majority whose opinions are much more supportive of new density and new transportation solutions – but whose voices are rarely ever included in the city’s planning process.

Of course, our democratic process requires energy and participation. There are lots of people who chose not to vote because their vote “will not be effective”.

Most people are uninformed about this issue, do not ride transit, or have no idea how to build transit effectively. Their opinion should not count as much as the people who are taking the time to inform themselves and to be involved.

If someone is not involved, their opinion is probably uninformed and negative.

Meetings to planning a company project can be just as bad.

Uninformed people should not be part of the process(^{see below}). In
an old Inc. article, Joel:

When was the last time you scheduled a meeting and invited eight people instead of the three people who really needed to be there simply because you didn’t want anyone to feel left out?

When was the last time you sent a companywide e-mail that said something like, “Hey, attention coffee drinkers: If you finish the pot, make another!” even though there is actually only one person who violates this rule (and she’s your co-founder)?

When was the last time you got into a long discussion over the color palette for the new brochure with a programmer, who has nothing to do with the brochure but sure knows that he doesn’t like orange?

These are symptoms of a common illness: too much communication.

(“below”)
However, I disagree with Joel’s assertion that only people whose vote counts should be allowed to attend meetings. Decisions with no visible process result in no buy-in. While a company is not a democracy, and a city is not a company both should learn from each other.

What a company can learn from a city:

1. Process does matter. Process means consistency and reliability in how decisions are being made. People know how to voice their opinion. They know that there is a means and method for voicing their opinion. Instead of voicing opinion in an adhoc, disruptive manner – they can wait until the allocated time.
2. Only some people get a vote. Many people can show up to a city council to express their opinion, but only city council members get a vote. In company meeting, discussion can include everyone – but predecided ( and preannounce! ) who’s vote will be counted. For example, if a developer is trying to decide who to best implement a feature. Only his/her, the CTO’s, QA’s and customer service rep’s votes are counted. Others who are not involved, do not get to vote. They can express their opinion but they are not a decision maker (for this issue). Only people expending effort or where the decision has a material impact on their job should be counted.
3. Representatives get “elected”. Allow some self-selection in the process. Try to allow the lead representative to be selected by people other than managers. If a developer selected to be the lead in a project makes a decision, this makes it easier for the decision to be respected.
4. Make the discussion observable and inclusive While only some people get a vote, allowing others to learn from the process of making a decision prepares those observers to step into their own decision-making role. It also allows them to take knowledge from one decision-making group to another.

What a city can learn from a company:

1. Require an energy expenditure to participate. A meeting should only be open to people who have attended the last 5 meetings.
2. Allow adhoc representation. Allow people to represent adhoc groups. For example, allow a person to collect 10+ signatures of his neighbors giving him/her proxy authority to voice their collective opinion. Require that this adhoc representative keep the people she is representing informed of the progress and results. (With power should come responsibility).
3. Allow weighted voting. In a company, the CTO’s vote counts more than a lowly developer. When voting for a company’s board of directors’, shareholders have a vote based on number of shares not a one vote per shareholder. In a city planning process, the “vocal” minority may represent no one other than themselves. Let the “vocal minority” collect proxy signatures to indicate how strongly their “silent” neighbors (who can’t participate) trust the “vocal” people to represent the “silent” majorities best interest. The more signatures, the more strongly a “vocal” representative’s vote/opinion should count. Allow certain signatures to be more valuable than others based on the issue. For example, distance to a housing project, transit user’s opinion on a transit project, etc.

Update:

Lastly, learn when you should not vote or participate.

1. If you personally do not have any direct, meaningful, unique knowledge: don’t participate. Observing is o.k. – voicing a “I agree” content-free vocalization is not o.k.
2. If you don’t have the time to stay involved: don’t sign up and then drop out.
3. If an issue has no one who cares: then the decision can be made by a single person. Others should insist that that single person make the decision. The sole decision-maker should not need the CYA of a “group vote”.
4. If you cannot expend effort on the solution, then don’t vote. Note that “effort” does not mean “coding” or “making”
5. If the decision will not effect how hard your job is, then don’t vote. If the decision does meaningfully effect your job then you must participate and must vote.

There is this temptation to dismiss the concerns of Customer Service or QA people as being less important than that of the development team. This is ass-backwards.

A Customer Service rep will have to deal daily with a bad development decision. Their job satisfaction, their ability to deliver happy customers is daily determined by developers decisions. They must be allowed to participate and must be given a strong voice.

The internet provider I use should ONLY provide the infrastructure to connect me with the Internet.

As a business owner, I depend on skype / chat to conduct all my business dealings. My internet provider should not be permitted to interfere with my business transactions.

For any internet provider to insert themselves into the conversation I am having with the world, is the same as if the phone company inserted themselves into my voice communication.

I do not want a operator breaking in on my voice conversation to add their two cents to my private voice conversations with my employees.

Nor do I want the internet provider to break into my private written conversations with my employees just because I happen to be using VoIP (skype) to talk with them.

Nor do I want the internet provider eavesdropping in on my chat messages with my employees!

To allow this eavesdropping in any manner is to allow wiretapping!

Bluntly, clearly – “deep packet inspection”, “traffic shaping”, whatever the buzz words used is SPYING.

Furthermore, my small business is internet-based. My small business cannot afford to pay for special treatment. If my customers have their traffic “shaped” so that my site appears to be unresponsive or slow, then my business will lose customers to the larger competitors that can pay off the Comcasts of the world.

Take Action

• In effect, a fan page becomes more like a bumper sticker popularity contest than a real business presence or one of deeper engagement
• In a “twitter-esque” move, Facebook is trading volume of interaction with depth of interaction.
• Facebook will be able to sell engagement more broadly

The battle to pick the one “word” is meaningless and impossible.

Thinking points:

• My kids like their classmates
• My kids like chocolate.
• My kids like Rush’s music.

When my kids click “like” on their classmates FB page – are my kids “fans” of their classmates?

When my kids click “like” on the Hershey FB page – are my kids “fans” of any Hersheys’ Chocolate, just the milk chocolate? or are they fans of the Hershey company?

When my kids click “like” on the Rush FB page – are my kids fans of Rush? Like some of Rush’s songs but would never go to a concert?

Mimic the real world

Any social network website should look first to the physical world social network interactions and try to mimic those. Attaching words to a relationship between people is hard. Facebook is not alone in this problem. All social network sites fail in these ways:

1. No measure of relationship strength – casual, sexual, deep love, or acquaintance.
2. No measure of relative and fuzzy relationship strength ( “I like Peter about the same as Paul, and I like Daniel more than Paul”)
3. No time component – relationships if not maintained diminish
4. No context – workplace only? professional? activity-centric ( i.e. a bicycling club )?
5. Age/Culture
   • Example: Middle East v. Germany – very different. In one women are forced to cover up, in the other prostitution is legal. So in Saudi Arabia, “liking” an unmarried woman may invite a visit from her brothers. In Germany, someone may be “liking” their favorite hooker! (Similar cultural differences exist within the U.S.)
   • Age/Generational: someone who grew up in the 1990′s has different meanings attached to words than someone who grew up in the 1970′s
6. No consideration of the type of the primary parties in the relationship. Is this relationship between 2 people, a person and a product, a person and a company, or two companies?
7. No consideration of the power structure in relationship: Does an employee “like” their manager so they get the next raise?
8. No secondary relationships – ( “I like Rush because my hot, hot girlfriend loves Rush. Oh, I just got dumped by that hot, hot now-ex-gf. I don’t listen to Rush any more.” )
9. No asymmetrical relationships allowed. Both parties have to agree to a relationship for the FB connection to be made. LinkedIn has the same problem.

So Facebook is just spinning their wheels looking for that magical word – and yes they are heading to the lowest common denominator as a result.

what Facebook is really getting wrong

But Facebook’s biggest problem is not “Like” v. “Fan”. Their biggest problem is their casual disregard for the social contract Facebook used to have with their users – not the legal TOS. But the unwritten social contract that was expressed in the marketing message and the way people use FB.

FB is stomping all over that social contract with their continuous “privacy” tweaks. Anything entered into FB is bound to be revealed by “default” to be public at some point. Go away on vacation for a month and come back and discovered that half your love life has been defaulted to be announced to your manager.

If Mark Z. and the rest of Facebook’s management can’t understand their own relationship with their own users, then it is impossible for Mark, et.al. to realize that relationships are too complex to be devolved to a single universal word.