Luis Andre Garrigo

Thoughts on Morgan Stanley’s Internet Trend Analysis

Luis Andre Garrigo — Fri, 14 May 2010 10:34:35 +0000

Last month Morgan Stanley put together a presentation of some analysis that it had conducted on “developing internet trends.” Below you will find the presentation followed by some comments. I apologize for the comments being poorly outlined below the presentation itself, but due to copy write restrictions I was unable to edit the original presentation.

Slide 4

The stock market is often a leading indicator and we have been seeing growth, although there is no guarantee whatsoever against a “double” dip.

Slide 7

The rate of growth of mobile internet is astonishing. Apple’s mobile safari browser is expanding at previously unheard of speeds, making the growth of AOL, Netscape and others pale in comparison. In response, a large percentage of websites (including this one) now offer “smart phone” compatible versions of their site.

Slide 8

The statement that mobile internet usage will surpass desktop usage within 5 years is a rather bold one. Though this slide depicts projects its growth rate, one must not forget that this is merely a projection and no projection is concrete. A bubble can always burst.

Slide 9

This projection is much more believable as we have yet to see mobile internet used for widespread commerce purposes. Ebay’s iphone app has seen tremendous growth ($1.5 billion worth of goods sold in 2010). smart phones have extreme potential for commerce purposes as they are often carried with the user everywhere he or she may go. A similar correlation lies within one’s own wallet which also goes wherever an individual does. This allows for impromptu, insight purchases to be made (i.e. you see a harddrive for sale at Best Buy, scan the barcode, find it online for cheaper, and complete the purchase all within Best Buy).

Slide 12

Though email represents a secure staple of the internet, it is not “fun.” My generation is known for its persistent ADD, constantly getting bored of what they have, ever-looking for a replacement (i.e. We upgrade our cellphones almost yearly). Social networking represents a new, ever changing way to communicate not just with your friends, but also with your colleagues and customers. Look for its drastic expansion as the major companies behind it (i.e. Facebook) are actively marketing themselves for total world domination.

Slide 13

Consumers now want access to all of their information from any location at any time. The solution to this conundrum is to store it all in the cloud. This is a very real possibility as network speeds are constantly increasing. The gradual shift towards cloud computing will surely cause some form of disruption to the now major market players as they will inevitably suffer from cannibalisation (failure to innovate as innovation would lead to the cannibalisation of their current technologies, however, new entrants have all the reason to innovate).

Slide 17

True, tech cycles have tended to last ten years, however, I would take this comment with a grain of salt as I do not believe that history serves as a valid indicator of future innovation. There is so much to look forward to in the next ten years: touch screen tablets, 3D displays, cloud computing, etc. Just because tablets and cloud computing are starting to take off doesn’t mean that we will have to put 3D displays on hold for another ten years.

Slide 20

Alluding to my previous comment on Slide 13, this is the “cannibalisation” that i was describing. Incumbents have less of a reason to innovate than new entrants do. Instead, they often seek to “buy out” smaller competitors when they fail to innovate. (i.e. facebook purchasing friend feed, yahoo purchasing flickr, etc.).

Slide 28

I disagree. 3g is not the key to success of the mobile internet. The next generation wireless will be. It must be as fast, as cheap and as capable as wired internet. 3G is none of these.

Slide 29

As I alluded to above, the only reason consumers seek to connect to the internet via wired internet is because the current wireless solutions are not adequate enough (i.e. too slow, not secure, too expensive).

Slide 32

If facebook continues to innovate, it will continue to dominate. They (alongside Google) are one of the few large tech companies that continue to reinvent themselves and avoid cannibalisation. In addition, that have a massive user base that includes the lagging market participants (those that wait until after the majority of the population has signed up for a service before they themselves sign up. they often are reluctant to change.)

Slide 35

Same comment as slide 29.

Slide 37

VoIP will always be cheaper than standard phone lines as it simply piggybacks off pre-laid data networks. This low cost strategy differentiates it in such a way that other carrier types cannot compete. As time passes, more and more users will discover that VoIP offers them them the same service that they can expect from both traditional land lines and mobile carries, but at a drastically reduced price.

Slide 39

Google Voice is essentially the cloud computing version of telephones. Users want to be able to access their content from multiple points, regardless of the medium.

Slide 42

Apple is only said to be leading in mobile innovation because it has the largest user base, however, other devices continue to innovate past the point Apple that has (i.e. Android). Apple is a company that will inevitably suffer from cannibalisation as its customers will eventually pick up on the lack of innovation each new product they launch has (i.e. iPad is essentially a large iPhone, “major” upgrades to past iPhones involved nothing more than adding copy/paste support, etc.). I would like to take the time to note that Apple’s notorious closed operating systems have little to no affect on consumer adoption, in fact this can probably be seen as a positive characteristic as it ensures a device that runs without errors (think Facebook versus Myspace, and which provider users ultimately enjoyed).

Slide 44

That is one cool looking graph, but all it really represents is product life cycles. Just because you are big now does not ensure that you are here to stay. I used to love my Sidekick, then I loved my Razr, then I fell in love with Palm, then my love for iPhone came about, and now my fantasies lie within BBM Messenger and RIM. People change. My generation tends to change faster.

Slide 46

In the field of technology, innovation (namely social innovation) often overlaps. Think Facebook Connect or Retweet buttons. We want to share our lives with others (to give purpose to them I assume). Ultimately, the only service that these “solutions” provide is to publicly display our lives to others. An iPhone is a status symbol, as is our Facebook page. Is there such a thing as oversharing? Probably not as we have seen companies such as Blippy capture markets that were previously considered unheard of (share your credit card transactions with others). In the words of Mark Zuckerberg, “people are dumb fucks.”

Slide 53

In my opinion, location awareness is the largest asset that mobile devices have to offer over more traditional computers.

Slide 54

See the Best Buy example I used in slide 9.

Slide 59

Mobile devices have the ability to disrupt quite a few markets because of their “real-time” characteristic. Whether it be news, social networking or directions, mobile devices can offer what you want when you want it.

Slide 62

Smart phones: more than just a phone. Eventually we will see networks based completely around data as calls will be routed through VoIP versus traditional networks.

Slide 75

I believe this comes down to a question of price. Users are more willing to make frequent inexpensive purchases on their mobile device than less-frequent, expensive purchases on their desktop PC. Apps for iPhones are based around a $0.99 model while desktop pc “apps” often cost much more (i.e. $30+). In other words, iPhone apps are approximately 30x more enticing than desktop apps. Why? Well, both desktop apps and mobile apps offer the same utility, with one being much cheaper than the other.

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Financial Regulation Efforts Following The Recent Financial Crisis

Luis Andre Garrigo — Fri, 07 May 2010 16:52:41 +0000

Below is an essay that I completed for a course in monetary policy. The goal was to critically appraise financial regulation efforts in light of the recent financial crisis.

Essay Prompt: Drawing on the experience of the Great Financial Crisis, critically appraise how changes in the system of financial regulation might assist avoidance of future such financial crises.

In order to critically appraise current financial regulation efforts it is important to first review what history has taught us. Prior to the Glass-Steagall Act, financial panics were a common occurrence as consumers had no assurance that their deposits were in fact soluble. The Glass-Steagall Act effectively created the Federal Deposit Insurance Corporation (FDIC) with the mission of “maintaining stability and public confidence in the nation’s financial system by: insuring deposits, examining and supervising financial institutions for safety and soundness and consumer protection, and managing receiverships.” Banks could no longer recklessly speculate on risky assets as they were now under the oversight of the FDIC.

However, all of that changed in the 1980s as traditional banking institutions began to encounter new competition from what we now call “shadow banks.” These new institutions were not subjected to the provisions of the Glass-Steagall Act as they did not accept traditional bank deposits. Due to this rather minute oversight, shadow banks were able to recklessly speculate on short-term liabilities while their primary assets remained illiquid in the long-term. As the size and market scope of these highly-leveraged firms grew, the picture was all but drawn out for a massive financial panic. Eventually, so-called shadow banking made up roughly half of the American financial system, thus recreating the same preconditions for a panic that existed prior to the 1930s. These highly-leveraged shadow banks were vulnerable to liquidity risk, but unlike traditional banks the FDIC did not back them in a “lender of last resort” fashion.

Innovation, namely financial innovation, is the sole reason why this financial crisis was able to occur. As Goodhart’s Law explains, any attempt at regulation — in this case the Glass-Steagall Act — will simply be circumvented by an individual’s ability to innovate around it. In spite of this, current regulation efforts must allow for a certain degree of discrepancy when enforcing the rules. Regulators must be able to interpret the law in real time on account of the financial industry’s ability to adapt around it in pursuit of greater profits.

In a perfect world the above solution would prove flawless. However, we live in a world that is far from perfect. We must count on the fact that regulators will eventually slip up, whether provoked or not. Therefore, we cannot rely on them to proactively spot and disarm every potential risk that may come about. Another financial panic is all but guaranteed, and it is only a matter of time until we face another crisis. Once again, we must turn to history to teach us a very important lesson on insolvency, one of the primary causes of the recent financial crisis. What we have learned from the past is that excess capital — namely bank reserves — has the ability to soften the impact of a potential panic. With enough cash on hand, well capitalized banks would be less likely to face a run as they would be considered liquid and therefore be able to gain enough equity to write off any bad investments and repay all deposits.

A final point to address is the overall size and interconnectedness of the major financial institutions. The recent crisis rippled through the global chain of financial systems due to the obvious behavior of banks and other financial institutions, which chose to mimic each other’s junk assets thus causing a universal aggregate liquidity risk. Consequently, this universal risk greatly enhanced the speed and severity of the crisis as the major financial institutions found themselves directly linked to one another. A potential tax levied on those firms who choose to merge with each other in order to increase their market dominance, effectively becoming ‘too big to fail’ in the process could solve such a problem. Regardless of the efficacy of a new tax, regulation efforts must focus on making financial institutions reluctant to consolidate. In its current form, the Volcker Rule seeks to “ensure that no bank or financial institution that contains a bank will own, invest in or sponsor a hedge fund or a private equity fund, or proprietary trading operations unrelated to serving customers for its own profit.” Essentially, depository institutions would be prohibited from engaging in risky investments that do not align with the interests of their customers. This regulation would make firms more careful in their conduct of issuing assets, and, given the limit on their size, be able to better manage their liquidity thus preventing — at least on a partial basis — another crisis.

History and experience of past crises has shown that there can be no fail-safe regulatory system as innovation will always seek out and exploit any loopholes in the system. Nevertheless, areas of reform are undoubtedly needed to attempt to avoid such crises. The measures that have been proposed above would first allow for regulation to adapt to current market conditions, and, in the case that they do not adapt quick enough, institute a fallback plan that would utilize excess reserves to pay off all creditors thus avoiding a liquidity trap. In addition, the Volcker Rule would ensure that banks “give priority to their essential lending and depository responsibilities.” All of this in conjunction with individual financial prudence should be enough to properly offset the next financial crisis.

REFERENCE

Caruana, J. 2010, ‘Financial Stability: 10 questions and about seven answers’, Reserve Bank of Australia 50th Anniversary Symposium 9 February. <www.rba.gov.au/publications/confs/2010/caruana.pdf>
FDIC Mission, Vision, and Values 2009, Federal Deposit Insurance Corporation. <http://www.fdic.gov/about/mission/index.html>
Goodhart, C.A.E. 1975, “Monetary Relationships: A View from Threadneedle Street”. Papers in Monetary Economics.
Office of the Press Secretary 2010, President Obama Calls for New Restrictions on Size and Scope of Financial Institutions to Rein in Excesses and Protect Taxpayers. <http://www.whitehouse.gov/the-press-office/president- obama-calls-new-restrictions-size-and-scope-financial-institutions-rein-e>
Rothbard, Murray Newton, 2005, ‘The Colonial Era to World War II’, A History of Money and Banking in the United States.
Shadow Banking System 2010, Investopedia. <http://www.investopedia.com/terms/s/shadow-banking-system.asp>
W. Blumenthal, N. Brady,’2010, Congress Should Implement the Volcker Rule for Banks’, The Wall Street Journal. <http://online.wsj.com/article/SB10001424052748703983004575074123680183534.html>

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Study Abroad, Chapter 5: Same Old, Same Old.

Luis Andre Garrigo — Sun, 21 Mar 2010 13:04:40 +0000

Monday started off with class early in the morning. I then headed to the Co-Op Bookstore to buy a textbook. Unfortunately for me, I was given the wrong directions. After an hour and a half of walking I finally got to the Co-Op only to find that I was at the wrong place and they didn’t have my text book. The place where I needed to be was actually right on campus (instead of an hour and a half walk away).

Deciding to make the best of a crappy situation, I hit up the local mall to do some shopping (school supplies, groceries, etc.). Then I took the bus home to shower before going out. Right before showering I realized that I hadn’t defrosted the food that I had planned on eating for dinner. That is when I had a moment of pure genius: shower with my meat so it would defrost quicker.

It worked.

Sort of.

I woke up Tuesday morning around 8:00am and was out the door by 9:00am headed for Manly Beach. The plan was to spend the day surfing. What I failed to realize was how far away Manly actually is from Sydney Uni. First I had to take a bus to a Circular Quay, where I had to board a 30-min Ferry that would take me across the harbor to Manly. From there I then had to walk across Manly to the beach side. All together the total travel time to Manly was over 2 hours. I doubt I’ll be going back there during the week, it’s just too far.

I ended up grabbing some lunch in the area and taking a swim in the water, but I never actually surfed. As it was a Tuesday, no one could go to the beach with me because they had classes, so I was alone. This meant that I had no one to watch my stuff every time I went in the water. Oh well, there’s always next Tuesday!

Aerial View of Manly Beach

I left Manly around 4:00pm, and got back to my room at nearly 6:30pm. I was dead tired, so I made some lasagna and passed out before 10:00pm. Wednesday and Thursday both came and went. Somewhere in that time I managed to catch up on sleep, hit the gym, and buy a plane ticket for my Easter break camping trip to the Outback. Thursday night there was a huge party on campus called Beach Ball. Apparently it was a great party, but not very many people I knew though it was actually worth its $30 entry price. Instead of Beach Ball, I stayed in and played cards with the roommates.

Fridays always suck when it comes to class (9:00am – 5:00pm), but after it’s the weekend! Friday night I headed off to Argyle with some friends, but somehow ended up at The Ivy. Leaving Argyle was a decision that we would all come to regret as The Ivy was empty all night while Argyle was packed. Oh well, it ended up working out better for me as we left The Ivy rather early, and Saturday morning I had to wake up real early. 7:30am early.

Like I said above, I woke Saturday morning at around 7:30am to make the hour long drive to Riverside Ski Park, which is where Sydney Uni’s Wakeboard Team keeps its boat. I spent the entire day wakeboarding, learning a new trick in the process. We headed back to Sydney around 6:00pm for a pub crawl that started at 8:00pm. The pub crawl was lots of fun except for one major caveat: I was wearing a white linen shirt and it was pouring rain. It ended up being a late night, which conversely made Sunday a late morning. Sunday was not a fun day, a bunch of homework thrown in between seasons 1 and 2 of Californication. Until next week…

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Natural Language Programming

Luis Andre Garrigo — Sat, 20 Mar 2010 23:58:48 +0000

That both English and Java are called languages is no coincidence. You use a language to express ideas. English expresses ideas to people, and Java expresses ideas to computers. What’s more, both English and Java have things like words, names, and punctuation. In fact, the biggest difference between the two languages is that Java is easier to learn than English.
— Barry Burd

What Is Natural Language Programming?

English is not an easy language to learn. However, it can be learned, though humans have thus far been unable to design a computer with the capability of fully understanding a natural language (where a natural language is nothing more than a human language, such as English, French, and Chinese).

The current model that Natural Language Programming Systems implore is highly inefficient. As it stands, engineers are actively working to design a system that can unambiguously convert any sentence into some associated high level programming language (i.e. Python). But why the need for a middle-man language? Why can’t the computer simply interpret the natural language itself without having to convert into an intermediary language?

Of course, the nay-sayers will argue against its plausibility simply because computer’s need an element of controllability (i.e. if-then statements). Their arguments against the Natural Language Programming may also involve natural language’s lack of an exact syntax (i.e. homophonic words). But this is thinking in terms of a close, limited mind. We must be open to future innovation as we humans are possible of achieving anything that we so desire (i.e. putting a man on the moon). There are solutions to the two stated barriers, and I have no doubt in my mind that we will one day overcome them.

In terms of economic benefit, Natural Language Programming is a no-brainer. Why spend valuable resources training people to complete intermediary programming tasks when we could simply increase the level of technology thereby increasing efficiency in production. Essentially everyone would be able to act as their own programmer, programming their computer to do anything they so desired.

The source file would be nothing more than a text file written in plain English, though it would have to be extremely detailed, much like the script of a movie. The computer would then interpret that source file and compile it into a program. Sounds simple right? Below is example of a Natural Language Programming source file.

First, create a window approximately 75% of the screen size. Then, add two menus to the top, one File and one Help. Under the File menu, add Exit. When a user clicks on Exit, the program should exit. Under the help menu, add a simple About option that describes this program.


Now create two buttons in the main window. The first button should say "Message", and the second one should say "Exit" (without the quotes). When a user clicks on Message, a message box should pop up saying "Hello, World!" (also without the quotes). When the user clicks on the Exit button, the program should exit.

Personal Assistant versus Personal Computer

I came across an excellent quote at O’Reilly.com while doing some research, “The true definition of power and expressivity in a programming language is how little it gets in the way of a programmer. Making power available does not make it usable.” It should therefore be possible for you and I to easily construct computer programs that accomplish complex tasks in a reasonably short period of time with no prior programming experience. That would truly make that computer’s power readily available to the computer’s user.

With a fully implemented Natural Language Programming System, your computer would be your new best friend. Menial tasks could be completed by simply delegating them to your computer. With that said, your computer could be seen as much more than a simple word processing, internet-enabled device. In fulfilling the role of Personal Assistant (PA) versus Personal Computer (PC) your “computer” could very well be labeled as a “robot.”

Realistically, when will this come into fruition? Most likely towards the later half of this century. The concepts detailed above may sound simplistic in nature, but designing a Natural Language Programming System will be anything but simple.

In the future, programming languages will be nothing more than pure English, Spanish or French. Tell a computer to do something and it will listen. You will not have to learn an entirely new language to communicate with your machine. Nor will you have to hire the services of someone to act as an intermediary. Anyone will be able to “program” in this new computer language, thus resulting in a more efficient work force. The benefits are extreme, and I look forward to one day witnessing the implementation of such a system.

Study Abroad, Chapter 4: First Week of Class!

Luis Andre Garrigo — Mon, 08 Mar 2010 04:45:59 +0000

This past week was Sydney Uni’s first official week of classes, so I woke up early Monday morning only to find out that my schedule didn’t actually have me starting classes until Thursday. Naturally, I went back to sleep.

I woke up later that afternoon to the voices of my roommates complaining about how awful their first day of class had been. With nothing else to do I headed to the gym for a little workout. I came back to find my roommates still whining about their day. Screw ‘em.

I logged on to Sydney Uni’s super secret DC++ Intranet and set Donnie Darko to download as I made some dinner. My plan was to stay in and watch a movie as no one was willing to go out after their first day of class. Though the night was mellow, I somehow managed to break my permanent retainer during dinner, which left me with a metal wire sticking out the side of my mouth.

Guess what I did Tuesday. Yeap, find an orthodontist that could accommodate me ASAP. After tracking one down, I headed out to run some errands. First thing on the agenda was to get a haircut. I ended up getting my hair cut by a 30-something year old lebanese man who worked out of a 7/11. Seriously, he cut my hair behind the register. Very weird, but he did give me a traditional “Aussie” shave for only $13. That left me with more than enough money to go out that night.

Wednesday morning I felt inspired to join Sydney Uni’s Wakeboarding Club, which is probably the greatest decision I have ever made. More on that later. First I must rant on how I spent $400 replacing my retainer at Edgecliff Orthodontics. So much for universal health care; this procedure would have cost no more than $75 in the States.

The Friend In Hand Hotel

So now that I found myself $400 poorer, what was I to do? Hit up Arcadia’s FREE Reunion Dinner, of course! We ate at the Friend In Hand Hotel in Glebe (bars are sometimes called hotels here, don’t ask me why). With a free dinner in my belly I headed to the bar at St. John’s Residential College to meet up with a friend who was visiting from Macquarie University. In case you were wondering, the Residential Colleges in Sydney are cool enough to have bars in their basements.

After realizing that I knew absolutely no one at John’s Bar I headed back to my apartment, where one of my roommates had some friends over. From there we all headed out to Landsdowne Hotel. There I met met two kids that go to the University of Miami, which was pretty cool. I ended up walking back to my apartment around 2:00am, stopping at Istanbul for some late-night kebab action on the way home.

Istanbul on King Street: The best place to get food at 3:00am

Thursday was my first official day of classes. First thoughts: the classes are massive (one of my classes has 750 people), and the pace at which the class is taught is considerably slower than Northwestern’s. After class I focused on getting myself organized: buying notebooks, printing lecture slides, ordering textbooks, etc.

Friday morning I woke up remarkably early for a 9:00am class. I had class straight through 5:00pm. From there I ran home to pack for the Wakeboarding Club’s Orientation Trip. The group was to meet at 6:30pm for a 1.5 hour drive north to Clfftonville Ski Park where we were going to board all Saturday and Sunday, staying in log cabins on Friday and Saturday night.

USyd Wakeboarding's Boat

The first club member I met went by the name Alex. As a full-time wakeboarding coach, he is quite the character. Funny story: I noticed that he was storing his wakeboard in a modified golf bag, so I asked him what that was about. Apparently he gets a real kick out of telling airline employees that he is a professional golfer. According to him, professional athletes can check in their equipment (his “golf” bag) free of charge. And so goes Alex, the professional golfer and wakeboarding club secretary.

We pulled into Cliftonville Ski Park 2 hours behind schedule. On the way we decided to stop at a McDonald’s, then a KFC, then a liquor store, then a gas station, etc. etc. It didn’t matter because we were finally there! The 20 of us stayed up until 4:30am drinking in our cabin. That is when I realized that Sydney Uni’s Wakeboarding Club is also Sydney Uni’s Unofficial Drinking Club.

Cliftonville Ski Park

We all woke up around 9:00am on Saturday morning ready to board. Before hitting the water I ate the most amazing concoction ever conceived: peanut butter and toast. I kid you not, it tasted amazing. After my PBT “discovery” I went out on boat with 8 others and wakeboarded straight through lunch. Turns out that my wakeboarding skill level sucks in comparison to these guys. Their “warm ups” consisted of 720’s (two spins, mid-air) and Tantrums (inverted trick).

We came in around 2:00pm for some food. I was stoked, these guys were the best wakeboarders I had ever boarded with. As we ate the other half of the group went out riding. We were then in charge of cooking dinner for the group. We had a nice little barbecue outside of the main cabin, then went on to party for a second night in a row.

Boarding...

I woke around 9:00am on Sunday and hit the water immediately. We rode until we ran ran out of gas around 11:00am. When we came in to refill we were greeted with some barbecue eggs by the other half of the group. After breakfast I headed back to Sydney Uni with some guys while the rest of the group got in some last minute rides. My body was aching and needed some rest, so I came back and passed out waking up later that night. Went for a little jog after waking up, and now I write this. A little longer than the rest, but definitely worth the read!

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The Pigou Club

Luis Andre Garrigo — Mon, 01 Mar 2010 12:34:31 +0000

Here’s a crazy suggestion, why not freely allow — but also tax — activities that harm other people? Well, that is the basic logic behind Pigovian taxes. With a Pigovian tax in place there is always an incentive to reduce the negative externality that is being taxed upon (such as pollution). In contrast stands regulation. Regulatory programs (such as cap-and-trade) do not allow for any incentive geared towards the reduction of said negative externality. Why would one pollute any less than what is allowable if there is no reward doing so?

From The Pigou Club’s homepage…

Imagine a small village with a lake. Nobody owns the lake – it is there for everyone to enjoy (they could privatize it, but that’s another story). Anyone can swim in it and catch fish.

Now meet John, he is an avid fisherman. He would like to catch fish every day.

Every time he catches a fish, he gains a fish and the community loses a fish.

But there is a problem – John’s overfishing is causing the number of fish to go down.

What will happen in the future? Here are a few options:

1 — John will continue fishing. One day the fish are nowhere to be found. Everyone loses.

2 — The village people ban fishing. John is very unhappy. He can’t even catch a reasonable amount of fish that wouldn’t harm the fish population (some people even claim that there are too many fish in the lake and that they are biting them while they are swimming).

3 — The village people tax fishermen for every fish they catch. John is moderately happy because he can still catch fish and the community is also happy – the fish stocks are stable. Villagers can lower their taxes because of John’s contributions and spend the extra money any way they like.

The third option serves as a prime example of how a community can implement a Pigovian tax system.

The Pigou Club essentially advocates for the use of Pigovian taxes. Founded back in 2006 when Gregory Mankiw called for the implementation of a Pigovian gas tax in his legendary Wall Street Journal manifesto, the Pigou Club has since seen its membership grow. It is important to note that the Pigou Club includes academics, economists and politicians from both sides of the political aisle. Even Paul Krugram, who has had his fair share of beef with Mankiw, has come out in support of a Pigovian gas tax.

Unfortunately, the majority of politicians are against the implementation of any sort of Pigovian tax (as any kind of tax is often seen as election suicide). I would, however, advocate for their use. Take, for example, a gasoline tax. Setting global warming skeptics’ concerns aside, it is safe to say that the burning of gasoline emits several pollutants, none of which are healthy for the environment and its inhabitants. Higher gasoline taxes, perhaps as part of a broader carbon tax, would be the most direct and least invasive policy to address environmental concerns.

Let’s assume for a second that you couldn’t care less about the environment. Regardless, here is another reason why one should support a gasoline tax: road congestion. There is only one way to reduce the number of cars on the road, and that is by raising the price of gasoline. A gasoline tax would reward those who use less gasoline while punishing those who use more. This greatly differs from the complicated system of cap-and-trade, which most economists happen to be against. As any public finance expert will tell you, consumption taxes are generally better than income taxes for sustainable economic growth, as income taxes discourage saving and investment.

Some quick facts about our gas tax example…

A $1 per gallon tax on gasoline would bring in $100 billion a year in government revenue, making a sizable dent in the looming fiscal gap.
As a higher gas tax would discourage the consumption of oil, the price of oil would fall in world markets. As a result, the price of gas to consumers would rise by less than the increase in the tax. Some of the tax would in effect be paid by oil nations such as Saudi Arabia and Venezuela.
A gas tax would encourage firms to devote more research and development spending towards the search for a gasoline substitute.

Economist Gunnar S. Eskeland recently wrote a piece on the implementation of a Pigovian gas tax in Mexico. He concludes that its effect on air pollution would be substantial. You can find his report embedded after the jump.

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Twitter’s Engineers Actively Working On A Twitter.com Redesign

Luis Andre Garrigo — Mon, 01 Mar 2010 07:40:19 +0000

Last Friday Twitter engineer Alex Payne (@al3x) tweeted, “If you had some of the nifty site features that we Twitter employees have, you might not want to use a desktop client. (You will soon.)” All hell broke loose shortly after as the blogosphere erupted into a collective spazz, making wild assumptions based on Payne’s tweet.

At this point, it safe to assume that Twitter is in fact working on a new layout. How drastic this redesign will be is up for debate. It seems that their main goal is to welcome more users into using http://twitter.com/ instead of directing them towards third-party services such as TweetDeck, Seesmic and Tweetie.

The thing is Twitter’s API is good, almost too good. For that reason, developers have been able to market excellent third-party apps. In fact, Twitter’s API is so good that Payne was forced to embarrassingly admit that the new web layout “…is actually *built* on public API methods we’ve already given developers.” Up to now, this “third-party service” strategy has allowed Twitter to grow at the rate that it has, but it has also left them in the red. As it stands, cataloging over 50 million tweets per day is an expensive task. As Twitter’s user base continually grows, more and more users are choosing to use third-party apps instead of http://twitter.com/ to play with the service, which is awful news for investors as third-party services don’t generate any revenue for Twitter.

With that said, I must warn Twitter not to do anything too drastic. Look no further than the hundreds of Facebook groups that spawn up after a new site redesign is implemented. Users hate it when a new layout is forced on them. A drastic layout change could prove negative to Twitter’s current user base, but their are two sides to every coin. A new layout could also prove attractive to users who have up to now relied upon third-party services to check in.

Of course Twitter would like to minimize the risk associated with deploying a site redesign. It seems that the proper course of action would have been to purchase an already fully-developed and fully-tested third-party service (i.e. Seesmic Web) and implement it into Twitter’s own site (keep in mind that they have raised over $150 million in capital, so money is not an issue). Judging from Payne’s tweets though, they will not be doing this. I wish Twitter’s engineers the best of luck in completing this laborious task.

UPDATE: Alex Payne (@al3x) deleted his original tweet moments ago. Refer to the screen grab for evidence.

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Study Abroad, Chapter 3: Last Week of Freedom Before School Starts!

Luis Andre Garrigo — Sun, 28 Feb 2010 05:27:56 +0000

This week started off rather early with a 9:00am Econ Orientation Session. I ended up getting a free lunch out of it, so waking up early on a Monday morning wasn’t all too bad! After Orientation I headed into downtown to look for a job, ending my search with a couple of possibilities. I’m not being too selective on where I will work as minimum wage here is around $25/hour. Ideally my job (if I actually end up getting one) will be in the hospitality industry: a restaurant, retail store or bar. My goal is to immerse myself in Aussie culture versus sitting behind a desk in an office somewhere.

After my mildly successful job search, I headed back to SUV (where I live) for some free pizza and trivia. It was whack, so I left. Somehow I ended up at a friend’s house on the other side of town. From there we decided to join a Pub Crawl that was happening on King Street. It was fun as we made a bunch of new friends.

King Street, Newtown

Tuesday rolled around. I woke up before 11:00am as that was my pre-set time to register for classes. My timetable isn’t looking too bad, as I have a four day weekend every week as Monday and Tuesday are my gap days. After picking classes I headed out to do a bit of grocery shopping and laundry. Oh, and I bought a TV for my room! Later that afternoon one of my roommates (Lucy, the Aussie one) invited a bunch of her friends over to drink and chill on our balcony. It was fun and I learned how to drink for next to no money ($5 boxed wine + juice = “goon”). My other roommate (Mel, the Austrian one) cooked a bunch of pasta, and was about to throw away the extra before I noticed (free dinner!!). I ended up staying in to recover that night, and I’m glad I did as Wednesday night ended up getting a bit crazy.

The view from my balcony.

All day Wednesday I sat around doing nothing until about 7:00pm. The plan was to hit up a $10 all-you-can-eat/all-you-can-drink Thai buffet to stuff ourselves with copious amounts of food and wine. After the buffet we all headed to the UniLodge (another apartment complex on the other side of campus). The UniLodge has a rooftop pool, which is where our other friends were at. After getting to there, we realized that none of us actually wanted to go swimming, so we left for a bar. And so began our own little pub crawl on Broadway. We jumped from bar to bar, ending our night with some drunken Karaoke.

The UniLodge

On Thursday I headed into the city to meet up with a friend for some lunch. After lunch he had to go back to work, but I decided to give myself a walking tour of Darling Harbour and the Opera House. It’s beautiful. I intend to go jogging around the area next time I have some free time, but that day I wasn’t wearing proper jogging clothes. Instead, I headed back to SUV to workout at Newtown Gym. Later that night we invited a few friends over and threw a balcony party at our apartment.

Beautiful view of Syndey's iconic Opera House.

Friday came and went. That night I ended up at The Ivy, and probably spent way too much money. I didn’t even intend to go out, but these two girls I had met at the UniLodge two nights before wanted to see me. I’m not one to turn down a good time, so I got dressed and went. It was a bit overrated, though I will probably go back.

Oh, but Saturday was ridiculous. Every year Sydney plays host to the world’s largest gay festival and parade. They call it Mardi Gras, and I promise it’s just as ridiculous as Mardi Gras back home (probably even more so as everyone here is gay). In good fashion, our friends all dressed up in comical sailor outfits and headed out to catch the parade. Words cannot describe what I saw. I hope I can one day blur out all the nudist transexuals and other weird creatures that were walking around that night.

To give you a little taste of Sydney's gay Mardi Gras parade...

Sunday has turned out to be just another recovery day. Woke up to a free Bar-B-Q downstairs and now I write this entry. Tonight I will most probably stay in as tomorrow is our first day of classes. If you would like to keep in touch, why not sign up to receive email updates whenever I post? Click here.

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The Startup Visa Act of 2010

Luis Andre Garrigo — Thu, 25 Feb 2010 14:13:14 +0000

Late yesterday afternoon Senators John Kerry (D-MA) and Richard Lugar (R-IN) introduced a piece of legislation dubbed “The Startup Visa Act.” With support from over 100 US venture capital and angel investors (including top players Y Combinator and Foundry Group), The Startup Visa Act represents a step in the right direction towards proper immigration reform.

The Startup Visa Act of 2010 would create a two year visa for immigrant entrepreneurs who are able to raise a minimum of $250,000, with $100,000 coming from a qualified U.S. angel or venture investor. After two years, if the immigrant entrepreneur is able to create five or more jobs (not including their children or spouse), attract an additional $1 million in investment, or produce $1 million in revenues, he or she will become a legal resident.
Source: TechCrunch

The Startup Visa Act does not look to take American jobs from natural-born citizens and give them to immigrants. In fact, it does the exact opposite. The Startup Visa Act will create jobs by bringing to the US immigrants who are looking to resource their newly-funded ventures with American employees. If these businesses fail to provide positive growth to the economy after a two year trial period, their founders will have their Visas revoked at which point they will be forced to leave the country.

As it stands, the theory behind the bill is excellent: either the entrepreneur stays in his home country and creates jobs there OR he moves to the US and brings jobs here. The choice is obvious, however, there are still a few kinks that need to be worked out. For starters, what is to stop an accredited angel investor from financing his buddy’s business venture in order to guarantee him lifelong citizenship? Also, the bill disregards those startups that chose to bootstrap and not take on any additional investment. Hopefully all of these “issues” will get worked out before the bill is passed into law, which may in fact happen.

As Fred Wilson over at A VC writes, “0.1% of all legislative ideas get this far. So we should be proud … but about 1% of bills that get this far actually turn into laws. So we’ve got a lot more to do. We need everyone to contact their Senators and Representatives and explain why this is such an important issue.” I would suggest you head over to The Startup Visa’s homepage — http://startupvisa.com/ — if you would like to get involved and support the cause.

Check out the full bill embedded after the jump.

Dealing With Fraudulent Identities

Luis Andre Garrigo — Tue, 23 Feb 2010 12:15:14 +0000

Sooner or later most of the large social networking sites are going to come to the sad realization that they grew too fast. As Facebook actively develops a new data center one has to stop and wonder how much useless information they are storing on their servers. And I’m not talking about drunk photos and meaningless 3:00am status updates, as the problem stems a bit further than that, into the “grey” zone of internet identities.

Facebook's New Data Center in Prineville, OR

Let’s use my ten year old brother, Mark, as an example. Over the last few days he has become fascinated by VoIP, downloading Skype and registering no less than 5 accounts. Who is to stop someone from creating multiple internet identities? No one. I personally have created quite a few Twitter accounts (more than ten last time I counted).

With thousands of fake profiles created on a daily basis, Facebook, Twitter, Gmail and other services are unnecessarily forced to scale and waste resources maintaing these bogus profiles. What amazes me even more is that these services aren’t actively protecting themselves against this sort of fraud.

In all fairness, Facebook used to force you into using a university email address (not anymore). Gmail also required you to provide a cellular number when registering (not anymore). Twitter recently announced that they will be deleting accounts that have not shown any activity within the last 6 months (though they haven’t yet to implemented this strategy).

From the surface it seems as though these companies are more concerned about user growth than profitability. This business model is not perfect though, as fake profiles = wasted resources that could have been used towards improving the service itself. The problem is just beginning. How many more data centers will Facebook need to build before they realize that a real problem is on their hands? I hope they soon take note and worry less about attaining “millions more” users and instead focus more attention on their active user base. As any entrepreneur will tell you, 20% of your customers bring in 80% of your revenue. Focus on keeping those 20% happy, as they are the ones keeping you afloat.

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